NATIONAL aERONAUTICS AND sPACE ADMINISTRATION

Laggard to Leader
How Australia Can Lead the World to Zero Carbon Prosperity
> > > Australia must stop using the promise of a global treaty that wont eventuate to duck responsibility for its ballooning coal and gas exports. A moratorium on coal and gas expansion followed by a phasedown will drive a massive increase in global renewable energy investment. Australia can lead the world to cheap, abundant renewable energy by deploying off-the-shelf, zero carbon technology that will grow Australias prosperity.

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Laggard to Leader
How Australia Can Lead the World to Zero Carbon Prosperity

LEAD AUTHORS
Fergus Green and Reuben Finighan

> > >

Australia must stop using the promise of a global treaty that wont eventuate to duck responsibility for its ballooning coal and gas exports. A moratorium on coal and gas expansion followed by a phasedown will drive a massive increase in global renewable energy investment. Australia can lead the world to cheap, abundant renewable energy by deploying off-the-shelf, zero carbon technology that will grow Australias prosperity.

Laggard to Leader

2012 This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 UnportedLicense. To view a copy of this license, visit http:/creativecommons.org/licenses/by-nc-sa/3.0/ or senda letter to Creative Commons, 171 Second Street, Suite300, San Francisco, California, 94105, USA.

Acknowledgements
Lead Authors: Fergus Green and Reuben Finighan Researchers: Josh Brown Lisa Caripis Tom Dreyfus Lisa Evans Ashley Fletcher Patrick Hearps Cameron Jewell Gillian King Jay Lewis Marina Lou Tristan Maddocks Cassidy Prent Russell Stubbs Michelle Tran Liem Truong Daniel Wiseman Graphic Design: Phuong Le Alice Liu Claire Miller Tracey Nguyen Angeline Yannopoulos Guyang Chen (The Climate Group) Expert Reviewers: We are grateful to the following people who peerreviewed the entire report: Associate Professor Peter Christoff Professor Robyn Eckersley Martin Jones Dr Greg Picker We are grateful to the following people who peerreviewed individual chapters of the report: Dr Richard Denniss Declan Kuch Professor Malte Meinshausen Guy Pearse Mick Power Cdric Philibert BZE Production Support and Review: Hannah Aulby Pablo Brait James Bramwell Ben Courtice Gerard Drew John Fisher Vicky Fysh Margaret Gaita Pierre Grimaud Patrick Hearps Lucy Luo Liem Truong Michael Waters Sally Wilmott Matthew Wright Supporters: We are grateful to the following people and organisations that provided in-kind support to this project: Kate Nicolazzo, Nicolazzo Consulting Luke Hockley, Midnightsky

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Published by Beyond Zero Emissions Kindness House Suite 10, Level 1 288 Brunswick Street Fitzroy, Victoria 3065 Phone: 03 8383 2232 www.beyondzeroemissions.org July 2012 Designed using Adobe CS5

Printed by Impact Digital Unit 3-4, 306 Albert St Brunswick, VIC 3056 on Monza Satin FSC certified stock with 55% post consumer waste Cover photograph: National Aeronautics and Space Administration Suomi National Polar-orbiting Partnership, Blue Marble Australian view, 2012

Contents

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Contents
Executive Summary v Glossaryvii Part 1 Introduction Part 2 The Current Global Predicament 1 5
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2.1 Introduction 6 2.2 The Rapidly Diminishing Global Carbon Budget 6 2.3 The Deadlocked UN Climate Negotiations 9 References 12

Part 3 Australias Carbon Footprint: The Sphere of Influence Approach

3.1 3.2 3.3

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Introduction 16 The Sphere of Influence Approach 16 Australias Domestic Emissions 17 3.3.1 Australias Absolute and Per Capita Domestic Emissions 17 3.3.2 Australias Domestic Emisions in a Global Context 18 3.4 Australias Exported Emissions 20 3.4.1 Australias Exported Emissions Today 20 3.4.2 Australias Growth in Exported Emissions 20 3.5 Australias Carbon Footprint Under the Sphere of Influence Approach 20 References 22

Part 4 Australias Current Policy Settings: Explaining our Ballooning Carbon Footprint 
Introduction Six Problems with Australian Climate and Energy Policy 4.2.1 Arbitrary Targets, Low Ambition 4.2.2 Over-Reliance on Offsets: Green Carbon and Overseas Credits 4.2.3 Transition Gas 4.2.4 Hoping Against Reason for Carbon Capture and Storage 4.2.5 Insufficient Deployment Support for Renewables 4.2.6 Fossil Fuel Promotion Policies: Betting the Other Way References 4.1 4.2

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24 24 24 24 26 28 29 29 31

Part 5 Cooperative Decarbonisation: A New Paradigm for International Climate Policy

5.1 5.2 Introduction The Bottom-Up Reality

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34 34

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Cooperative Decarbonisation 5.3.1 The Fundamentals 5.3.2 Small Group Cooperation 5.3.3 Unilateral Action References

5.3

35 35 36 38 41

Part 6 Australias Role in Cooperative Decarbonisation

Introduction Cooperative Decarbonisation: What Should Individual Countries Do? Australias Responsibilities under Cooperative Decarbonisation 6.3.1 The Case for Australian Climate Leadership 6.3.2 International Equity 6.3.3 Australias National Interest 6.4 From Responsibility to Action References 6.1 6.2 6.3

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44 44 45 45 47 48 50 51

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Part 7 Renewable Energy: Australias Contribution

Introduction The Problem: Severe Underinvestment in Zero Carbon Innovation 7.2.1 The Case for Public Investment in Zero Carbon Deployment 7.2.2 The Case for Public Investment in Renewable Energy Research and Development 7.3 What Should Australia Do and What Effect Would it Have? 7.3.1 Unilateral Action: Australia Leading by Example 7.3.2 Coordinating With Like-Minded Countries 7.4 The National Interest in Renewable Technology Deployment and Development 7.4.1 Sizing the Zero Carbon Economy 7.4.2 Australian Opportunities in Clean Tech Markets References 7.1 7.2

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54 55 56 56 58 58 63 66 66 68 71

Part 8 Ending the Growth in Fossil Fuels: Australias Contribution

Introduction The Problem: More Fossil Fuels Than We Can Safely Burn What Should Australia Do? What Effect Would These Actions Have? 8.4.1 Australias Moratorium 8.4.2 Bringing Global Attention to the Issue 8.5 Fossil Fuels: Really in Australias National Interest? 8.5.1 Understated Risk: A Global Carbon Bubble? 8.5.2 Overstated Value: The Minor Role of Coal 8.5.3 Further Research References 8.1 8.2 8.3 8.4

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76 76 77 80 80 81 82 82 84 85 86

Part 9 Conclusion

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Executive Summary

Executive Summary

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Australia has the power to lead the world towards zero carbon prosperity.
Australia, along with the rest of the worlds nations, has formally adopted the objective of restraining global average temperatures to no more than two degrees Celsius (2C) above pre-industrial levels. The 2C goal is a proxy for avoiding dangerous and irreversible changes to the worlds climate an outcome that the vast majority of Australians support. Even a 2C average temperature rise would worsen climate change impacts that are already being felt across Australia. Yet the worlds breakneck growth in fossil fuel supply and consumption is causing greenhouse gas emissions to rise at such a rate that, as the International Energy Agency warned this year, the door to a 2C trajectory is about to close. To keep the door open, global emissions must peak and begin to decline by 2020 at the absolute latest and then keep declining to zero by between 2040 and 2050. We are in the critical decade. Decisions we make today will largely determine the state of the climate system within which all subsequent generations must live. The worlds nations gathered in Durban in late 2011 to continue long-standing negotiations towards a comprehensive international treaty to cut greenhouse gas emissions. The best they could agree was that they would aim to negotiate by 2015 an agreement requiring some countries to start reducing emissions beginning in 2020. These negotiations cannot be relied upon to secure the emissions cuts that are required. It is clear, argue the editors of the worlds preeminent scientific journal, Nature, that the science of climate change and the politics of climate change ... now inhabit parallel worlds. Australia, too, is operating in a parallel world. Having introduced a carbon price that it claims will usher in a Clean Energy Future, the Federal Government and its State Government counterparts are aggressively supporting a massive programme of investment in new mines, wells, pipes and ports. These projects will see Australia export a staggering amount of highly emissions-intensive coal and gas during and well beyond the critical decade. Australia is already the worlds largest coal exporter, responsible for more than a quarter of the worlds traded coal, and is the fastest growing exporter of liquefied natural gas. The emissions embodied in Australias fossil fuel exports already total much more than our domestic emissions. Based on data accumulated by Australian Government agencies, Australias combined coal and gas exports are projected to more than double between now and 2030.

To allow this to occur would be catastrophic for global efforts to avoid dangerous climate change: it would mean Australia would be causing more than 1 in every 10 tonnes of the greenhouse gas emissions that can be emitted into the atmosphere in 2030 consistent with a 2C warming trajectory. Australia is the steward of its natural resources. They belong to all Australians and we can choose what to do with them. When our exports of coal and gas are burned, the carbon dioxide released into the atmosphere is the product of these choices. The fact that these emissions are not counted in Australias carbon accounts under UN carbon accounting rules has previously been used as an excuse for us to ignore their consequences. But these rules are based on the idea that all countries will have emissions reduction targets, the achievement of which will add up to the global cuts necessary to stay within the 2C limit. With the UN negotiations deadlocked and no foreseeable prospect of such an international regime emerging in the necessary timeframe, this excuse is not acceptable. Hoping, against all probability, that the negotiations will reach a breakthrough just in time, while at the same time making the problem they are trying to solve significantly worse is a dangerous, counterintuitive and counterproductive approach for Australia to take. It is well beyond time to approach the global challenge of preserving a safe climate in a very different way. It is time to put leadership towards zero carbon prosperity at the heart of our response. In this report, Beyond Zero Emissions proposes a new way forward: a practical, problem-solving approach to the decarbonisation of the global economy within the timeframe necessary to preserve a safe climate driven by national leadership and accelerated through international cooperation. The logic of Cooperative Decarbonisation is simple. Each country must phase down to zero or very near zero the greenhouse gas emissions associated with every economic and social process over which it has control or influence. Instead of drawing lines at national borders, this approach recognises that, in a globalised economy, countries have shared responsibility for many of the emissions that occur in any one place. As such, countries should use every lever they have to eliminate those emissions within their sphere of influence, including the fossil fuels they export and the goods they import. Clearly, international cooperation will be required particularly to ensure that the goals of sustainable economic development are achieved and that wealthier countries assist low income countries to make this

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essential transition. But instead of trying to do it all in one grand bargain as they are today, countries should work in smaller groups, focusing their efforts on the individual sectors and processes that cause emissions working to leave fossil fuels in the ground, preserve the worlds forests and make renewable energy affordable for all. Australia, one of the worlds wealthiest nations, is one of only a small handful of countries that can lead this process. The main reason for this is simple: our sphere of influence over global emissions is immense. Our high domestic emissions make us an important player, on par with nations like France, Spain and South Korea. But it is our ballooning coal and gas exports that make us a truly critical influence on global emissions. We can use this position to focus the attention of world leaders on the most important, yet least discussed part of the climate problem: the fact that only one eighth of the worlds remaining fossil fuel reserves can safely be burned. Australia can help make that which is currently unthinkable a global fossil fuel phase out a reality. We propose an Australian moratorium on new fossil fuel developments: a bold move from the worlds largest coal exporter that can serve as the centrepiece for a wider call to action. Such a move would maintain the current global price of coal and stop it from falling by an expected 30% this decade. It would be one of the few conceivable ways that any single country could jolt world leaders into action, creating the economic and political momentum to commence immediate global discussion on the best and fairest means to phase-out fossil fuels. Thankfully, Australias global power does not arise only from our ownership of the resources that are fuelling the problem. As the beneficiary of world class solar and wind resources, we also hold the key to the most important solutions. Solar photovoltaics (PV) and wind energy are essential to decarbonising the worlds energy system. Thanks largely to the targeted investments made by Germany and other European countries when these technologies were more expensive, they have sailed down the cost curve and are now price-competitive with fossil fuel energy in many markets. Germanys installation of almost 30GW of solar PV brought PV prices down by an incredible 65% over the past six years. The other crucial technology is concentrating solar thermal (CST) with storage. This technology, which is operating today in other countries, produces 24 hour energy from the power of the sun. The Zero Carbon Australia Stationary Energy Plan showed that powering the Australian economy using predominantly CST is technically and economically achievable, starting now, in ten years. The greatest gift that sunny Australia could give to the world is to repeat for CST what cloudy Germany did for solar PV: through smart

policies and targeted investments, enable the deployment across Australia of enough CST to make this game-changing technology cost-competitive with fossil fuels everywhere. Cheap renewable energy will solve some of the most challenging problems facing humankind this century from climate change, to oil scarcity, to energy poverty and allow us to build a global economy on foundations as reliable as the rising sun. Australia has the power to make it happen.

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Glossary

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Glossary
Acronym/ Abbreviation BZE CCS CD CDM CEF CO2 CO2-e CSG CST Gt IEA IISD IPCC LNG LULUCF Mt ppm PV UN UNDP UNEP UNFCCC ZCA Definition Beyond Zero Emissions Carbon Capture and Storage Cooperative Decarbonisation Clean Development Mechanism Clean Energy Future Carbon dioxide Carbon dioxide equivalent Coal Seam Gas Concentrating solar thermal Gigatonne (1 billion tonnes) International Energy Agency International Institute for Sustainable Development Intergovernmental Panel on Climate Change Liquefied Natural Gas Land Use, Land Use Change and Forestry Megatonne (1 million tonnes) Parts per million Photovoltaic United Nations United Nations Development Program United Nations Environment Program United Nations Framework Convention on Climate Change Zero Carbon Australia

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Part 1 Introduction

Part 1: Introduction

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1.

Introduction

I do not accept, proclaimed Professor Ross Garnaut at the launch of his 2011 Review of Australian climate change policy, that Australia is a pissant country.1
With less than one third of one per cent of the worlds population, Australia has built the worlds 13th largest economy and enjoys one of the highest incomes per person of any country.2 Historically, Australian governments of both political stripes have used our influence to lead the world on issues of global and regional importance. Prime Minister Hawke led the successful push to ban mining in Antarctica. The Hawke, Keating, Howard and Rudd Governments have led global efforts to stem nuclear proliferation and ban the testing of nuclear weapons. Under each of these governments, Australia played a central role in regional peace and security initiatives in Southeast Asia and the Pacific. Our diplomatic reach is substantial, and we enjoy a seat at the most important global decision-making table, the G20 an institution we helped elevate to that status. Yet when it comes to climate change a phenomenon that profoundly threatens our safety, prosperity and natural environment we are strangely content to play down our potential role and to let others take the lead. We are too small to make a difference; Arent we only 1.5% of the worlds emissions?; Australian leadership would be pointless, for only the big emitters China and the US can ever play a leadership role. Our political leaders actively reinforce these ideas from Tony Abbotts claim that Australian emissions reductions will not make a difference for 1000 years,3 to the Gillard Governments veneration of followership (Australias carbon pricing scheme puts us in the middle of the pack).4 Claims such as these tend to go uncriticised and have come to set the boundaries of mainstream debate about the desirability and effect of Australian climate action. The purpose of this paper is to refute the notion that Australian action is globally insignificant and to make the case that Australia can, and should, lead the world towards zero carbon prosperity. The ground-breaking Zero Carbon Australia Stationary Energy Plan showed that there are no technical or economic barriers to a complete decarbonisation of Australias stationary energy sector, for the first time disproving the conventional wisdom that renewable energy cannot provide baseload power. The full series of Zero Carbon Australia Plans will set out in similarly technical terms how Australia can decarbonise its transport, industrial, land-use and agricultural sectors, revolutionise the energy efficiency of its built environment and replace its coal and gas

export income. In this report we show how the practical, problem-solving approach to sectoral decarbonisation advocated in the Zero Carbon Australia Plans can be leveraged to achieve major emissions reductions globally. In particular, we explain how Australia can exploit its world class renewable energy resources and its unique position in the global market for internationally traded coal and gas to steer the worlds trajectory away from breakneck growth in fossil fuel exploitation and toward a truly clean energy future. Chapter 2 of this report describes the current climate change predicament in which humanity finds itself. It surveys the latest science and notes the necessity of reducing global emissions this decade if we are to stay in the safe range of 2C warming or below. The urgency of emissions reductions is contrasted with the deadlocked UN negotiations, which are extremely unlikely to yield a comprehensive agreement in the timeframe required. We explain why the Durban Roadmap is no cause for genuine hope and why a different approach to international cooperation is urgently required to supplement the UN process. The challenges discussed in this chapter pose the question: what should Australias role be in this critical decade? Chapter 3 illuminates the true extent of Australias contribution to the climate problem. Whereas we typically conceive of Australias carbon footprint purely in terms of emissions released within Australian territory, we explain why this approach grossly understates the tonnage of emissions caused by Australian economic activity. We make the case that considering Australias carbon footprint in terms of the emissions within Australias sphere of influence in particular our domestic emissions plus emissions embodied in our fossil fuel exports provides a far more realistic picture of Australias contribution to climate change in world without a functional UN process. Given the extraordinary scale of Australias coal and gas export boom, the picture presented is not a flattering one: Australias combined domestic and exported emissions are on track to consume, by 2030, 11% of the remaining yearly global carbon budget required to keep below 2C of warming. It is widely perceived that Australias current policy settings including the Clean Energy Future package and carbon price will have a major impact on Australias emissions, restructure our economy towards clean energy and make Australia a global leader on climate change. In Chapter 4 we analyse Australias current domestic and international policy settings on energy, resources and climate change to demonstrate the inaccuracy of these perceptions. While Australia is certainly undertaking some welcome initiatives to reduce its emissions below business as usual, including the carbon pricing scheme, we show that Australian climate the Clean Energy Future package depends upon paying other nations to cut emissions for us, and on silver bullet

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technologies like CCS that look unlikely to ever arrive. This extremely risky policy approach comes at the expense of measures that would induce the deep, structural change needed for a zero emissions economy. When considered alongside the wide range of state and federal policies promoting the rapid exploitation of Australian coal and gas for export, the conclusion is inescapable: Australian policy is, on balance, fuelling the problem. Chapter 5 introduces a new way of thinking about international climate action Cooperative Decarbonisation. This entails a more practically-oriented, problem-solving approach to decarbonising the global economy, sector by sector, using a wide range of policies, measures, investments and cooperative structures. This chapter explains why approaching climate action in this way is more likely to yield progress on emissions cuts and structural transformation than the UN negotiations. Chapters 6-8 make the case for Australian leadership towards a zero carbon world within a Cooperative Decarbonisation paradigm. Chapter 6 argues the case that Australia should not only decarbonise its domestic economy rapidly but do so in such a way as to provide global leadership, co-operating intensively with like-minded countries to provide affordable, zero emissions solutions globally particularly in the developing world. This Chapter also outlines the kinds of practical international actions and policies that Australia could implement to ensure its domestic decarbonisation efforts are leveraged for maximum impact on global emissions. Chapter 7 explains why large-scale investment in the rapid deployment of commercially-available zero emissions technologies should be the focus of Australian climate policy, alongside increased investment in research, development and demonstration of new technologies. It describes the actions Australia should take in this regard and demonstrates that such efforts would make an immense contribution to making zero carbon technologies cheap and accessible for people everywhere. The second area where Australian leadership could make a great difference to the global emissions trajectory relates to the exploitation and export of coal and gas. Chapter 8 explains why a global fossil fuel phase-out, currently a sensitive topic in mainstream discussion, is necessary to preserve a safe climate. Accordingly, it outlines a series of steps that Australia should take to put the issue squarely on the international agenda, including a moratorium on new Australian fossil fuel developments, and explains the important effect on global energy markets and political action that such steps could have. The underlying message of Chapters 6-8 is this: in light of Australians desire for a safe climate, we must critically

examine the decisions we are now making about the shape of our economy over the next decade and beyond. While a comprehensive cost-benefit analysis of Australian decarbonisation is beyond the scope of this report, each of Chapters 7 and 8 highlights a number of reasons why these actions will serve Australias national interest. Beyond the clear value of lessening the odds of dangerous climate change, we argue that on raw economic terms, building Australias future around fossil fuels bears substantially greater risks and far fewer benefits than are currently acknowledged. Investing such wealth in the rapidly growing clean tech sector is a much wiser option given our natural advantages in renewable energy innovation and our world class solar and wind resources. Everything proposed in this report is technically possible, legally permissible and economically viable. All our proposals can be implemented now using commercially available technologies and processes. All can be encouraged or mandated through laws and policies that have been successfully implemented before, in other contexts, and which the Commonwealth Government has the Constitutional authority to pursue. Moreover, given the diversity of industries that comprise Australias multi-faceted, service-based economy, it is inconceivable that anything we propose individually or in totality would significantly retard the projected growth of Australias economy, or make Australia a less equitable society, in the many decades to come. We are nevertheless cognisant of the political, economic, social, and cultural barriers that stand in the way of Australia implementing reforms and policies along the lines we propose on these pages. It is because of these barriers that the scope of Australian action that can be imagined, discussed and analysed in detail is currently so limited. An alternative vision is required. Instead of projecting our current norms and structures forward over forty years and thinking about what could be tweaked, we believe it is preferable to articulate a vision for the future we want, informed by the realities and projections of the best climate change science we have at our disposal, and forge a pathway to that future. Climate change poses extraordinary threats to our collective future and Australia is a huge part of the problem. Yet, we have immense capacity to contribute substantially toward global climate solutions, dramatically reducing the risks posed by climate change, at a time when our leadership is urgently required. There has never been a better time for Australia to shed its laggard skin and lead the world to zero carbon prosperity and a safe climate.

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References
1. Ross Garnaut, quoted in Tom Arup, Were Not Pissants, The Age (1 June 2011) http://www.theage.com.au/national/were-not-pissants-garnaut20110531-1feq1.html. A pissant is a type of ant found in Europe. Used in its adjectival form, it is a pejorative that means insignificant and annoying: see Pissant, Oxford Dictionaries, http://www.oxforddictionaries.com/definition/ english/pissant. 2. World Bank, Gross national income per capita 2010, Atlas method and PPP, World Development Indicators Database (1 July 2011) http://siteresources. worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf; Gross Domestic Product 2011 (9 July 2012) http://databank.worldbank.org/databank/

download/GDP.pdf. 3. See, e.g., Tony Abbott as quoted in Lauren Wilson and Matthew Franklin, 1000 year vision fuels climate fight, The Australian (29 March 2011) http:// www.theaustralian.com.au/national-affairs/year-vision-fuels-climate-fight/ story-fn59niix-1226029695904 and Rio Meet Another International Talkfest: Abbott, Business Spectator (21 June 2012) http://www.businessspectator. com.au/bs.nsf/Article/Rio-another-international-talkfest-AbbottVG6WD?opendocument&src=rss. 4. See, e.g., Wayne Swan, The Role of Government in a Changing Economy Address to the Economic and Social Outlook Conference, Melbourne (30 June 2011) http://www.treasurer.gov.au/DisplayDocs. aspx?doc=speeches/2011/021.htm&pageID=005&min=wms&Year=&DocTy pe.

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Part 2 The Current Global Predicament

Contents
2.1 2.2 2.3 Introduction   06 06 09 12 The Rapidly Diminishing Global Carbon Budget The Deadlocked UN Climate Negotiations

References 

Chapter 2: The Current Global Predicament

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2.1 Introduction
Earlier this year, the International Energy Agency (IEA) gave its most strident warning yet that a safe climate is about to slip out of reach. Global energy emissions rose more rapidly in 2011 than expected, to an all-time high of 31.6 billion tonnes of carbon dioxide equivalent (CO2-e), leading IEA Chief Economist Fatih Birol to announce that the door to a 2C trajectory is about to close.1
For 20 years the UN climate process has been working to keep this door open. While countries have striven to limit global warming to safe levels through the development of a comprehensive international climate treaty, global energy emissions have soared by 50%.2 In 2012 there is still no such treaty on the horizon. The worlds key emitters remain irreconcilable, the negotiations are deadlocked, and the tough decisions keep being postponed. In the words of the editors of the worlds pre-eminent scientific journal, Nature, the latest round of negotiations in Durban was an unqualified disaster. It is clear that the science of climate change and the politics of climate change... now inhabit parallel worlds.3 As a result, humankind finds itself in an extraordinary predicament: we are about to step over dangerous climatic thresholds, towards a world that nobody wants, because we cannot find a way to cooperate. This chapter elucidates that predicament. First, it briefly examines the present science regarding what constitutes a safe degree of global warming and the implications of our current emissions trajectory. Using data and analysis from the International Energy Agency, the German Advisory Council on Climate Change and Nature, it concludes that: The latest science provides increasingly serious warnings about the risks associated with even 2C warming. To give a likely chance of avoiding warming above 2C, global emissions need to peak before 2020 and decline rapidly thereafter to zero by 2050 (however, for developed countries, the deadline is much earlier, as discussed in Chapter 3). Only one eighth of the worlds remaining fossil fuel reserves can be burned before the 2C limit is breached. Current international emissions targets fall well short of the 2C goal, and the world is presently on track to use up its carbon budget by 2025 and raise global average temperature by 6C. The chapter then explains why the current UN climate negotiations and the top-down paradigm of international climate action with which they are associated are not the solution. While recognising that the UN process has laudable aims and is worth persisting with, the chapter concludes that:

Because of numerous design flaws in the UN approach, a new treaty is unlikely to emerge anytime soon. Even if agreed, any new treaty would likely impose only modest restrictions on key countries emissions and only with effect from 2020 at the earliest far too little and far too late to achieve science-based emissions cuts in this critical decade. Relying on the UN process alone is dangerous at least in the short-medium term, a different approach to cooperative climate action is urgently required.

2.2 The Rapidly Diminishing Global Carbon Budget

Climate scientists tell us that greenhouse gas emissions are warming the world and that a temperature rise of more than 2C would pose catastrophic risks for human populations and ecosystems alike. More than 100 countries Australia included have formally recognised these facts by adopting a global warming limit of 2C or below as a guiding principle for climate change mitigation efforts. This 2C limit has been equated with a CO2-e concentration of no more than 450 parts per million (ppm) in the atmosphere (compared with around 390ppm today and 280ppm pre-industrially), which is estimated to give a 50/50 chance of a temperature rise of 2C or more. As discussed in Box 2.1, there is mounting evidence that even 450ppm may pose serious risks, and as such it represents an extreme upper limit for CO2-e concentrations.

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Box 2.1: 450ppm and 2C: A Risky Legacy?

The 2C and 450ppm guardrails are the product of a long history of climate sensitivity analysis leading up to the 2007 International Panel on Climate Change (IPCC) Report. Although much of todays climate change politics is conducted around these targets, they are not chiselled in stone. Science continues to improve upon our understanding of the climate, and what constitutes a rational policy response will ideally move in tandem. Estimates of climate sensitivity (or the amount global temperatures rise from a doubling of atmospheric CO2 concentrations) have remained remarkably constant for more than a century, with Svante Arrhenius arguing in 1896 that doubling atmospheric CO2 would increase global temperature by 4C. Today, a doubling is expected to cause 3C of warming, with a range of 2 to 4.5C. But the risk of climate feedbacks and tipping points transforming 2C of warming into much more such as permafrost thawing, changing vegetation patterns and ice-albedo feedbacks are becoming an increasing concern. In light of the latest science, is there anything special about 2C? The IEAs World Energy Outlook 2011 provides the following answer:4 The expected warming of more than 3.5C in the New Policies Scenario [note that the IEAs New Policies Scenario assumes substantially increased investment compared with today, but only achieves stabilisation at 650ppm and 3.5C of warming] would have severe consequences: a sea level rise of up to 2 metres, causing dislocation of human settlements and changes to rainfall patterns, drought, flood, and heat-wave incidence that would severely affect food production, human disease and mortality. Alarmingly, research published since the International Panel on Climate Changes Fourth Assessment Report in 2007 suggests that this level of temperature change could result from lower emissions than those of the New Policies Scenario, due to climate feedbacks (IPCC, 2007a). For example, drying of the Amazon would release CO2 that would then lead to further warming (Lewis et al., 2011) and rising arctic temperatures would lead to extra emissions from melting permafrost (Schaefer et al., 2011). These feedbacks have not yet been characterised with certainty, but they are expected to be triggered by temperature rises between 2C and 5C (Smith et al., 2009). The threshold for large-scale sea level rise may be similar, between 1.8C and 2.8C (Lenton et al., 2008 ; Hansen et al.,2008).

From the perspective of emission scenarios, these feedbacks imply that an increase in emissions can no longer be assumed to result in a pro-rata incremental increase in impacts. Put another way, a decision to relax climate policy and aim for a higher temperature target, such as 2.5C or 3C, may not actually allow much room for an increase in emissions, given the likelihood of further emissions and warming being triggered by feedbacks. For example, Schaefer et al. (2011) calculate that under conditions similar to the New Policies Scenario (which stabilises the atmospheric concentration at around 650ppm CO2-eq), emissions from melting permafrost would lead to a further increase of 58 to 116ppm in CO2 concentrations, resulting in further warming and more feedbacks. The 450 Scenario, by definition, achieves a longterm atmospheric concentration of 450ppm CO2-eq (resulting in average warming of 2C). Such a temperature increase (even without allowance for additional feedback effects) would still have negative impacts, including sea-level rise, increased floods, storms and droughts. The new evidence has led some researchers to conclude that even keeping the temperature rise to 2C may risk dangerous climate change, and that an even lower temperature threshold and corresponding stabilisation target (such as 350 ppm) should be set (Anderson and Bows, 2011; Hansen et al., 2008; Rockstrm et al., 2009; Smith et al., 2009). The uncomfortable message from the scientific community is that although the difficulty of achieving 450 ppm stabilisation is increasing sharply with every passing year, so too are the predicted consequences of failing to do so. Beyond Zero Emissions advocates a return to 350ppm or below as the necessary long-term outcome. This will require a rapid decline in global fossil fuel emissions by 2020 and emissions draw-down in following years to reverse our overshoot. Nevertheless, like the IEA, this paper regularly makes reference to the conventional 2C scenario simply because it is the most widely modelled, and it is not widely known that the world is currently on track to completely overshoot even this risky target.

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The 2C limit can be expressed in terms of our remaining carbon budget, or the amount of CO2 in gigatonnes (Gt or billion tonnes) the global community is permitted to release into the atmosphere before this temperature guardrail is breached. If we aim for a 75% chance of staying within the 2C guardrail, the worlds carbon budget over the 20002050 period is around 1,000Gt of CO2. As at 2012, we have already emitted around 450Gt CO2 almost half of the 2C carbon budget within only 12 years5 leaving only 550Gt for the remainder of the period to 20506. The small size of our remaining carbon budget sits in contrast to the immensity of the worlds remaining fossil
FigurE 2.1

fuel reserves. Current reserves are equivalent to 3,500Gt of CO2. Given that some of the global carbon budget will be consumed from non-energy sources of emissions, at most only 1/8 (equivalent to around 450Gt CO2) of our remaining fossil fuel reserves can be burned up to 2050. Figure 2.1, adapted from Meinshausen et al (2009), shows the relationship between the amount of carbon dioxide we emit during the 2000-2050 period and our likelihood of exceeding 2C of warming. Keeping global emissions within the carbon budget requires energy (fossil fuel) emissions to peak within the latter half

Total global proven fossil fuel reserves, compared to the probability of exceeding 2C global warming as a function of cumulative CO2 emissions 2000-20497
a 100%
Very unlikely

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Carbon budget for 2C

Unlikely
Very likely

500
Land use

1,000 1,500 2,000 Cumulative total CO2 emissions 200049 (Gt CO 2 )

2,500

2000 - 2012 emissions already released

Gas including unconventional Oil Coal Total reserves >3500 Gt Unburnable carbon >3000 Gt

500

1,000 1,500 Emitted, available carbon (Gt CO2 )

2,000

2,500

Below the curve, the figure shows: 2000-2012 emissions These have already been released, and so are subtracted from the 2000-2050 budget. Emissions over these 12 years have already taken us almost halfway to the carbon budget. Fossil fuel reserves Also shown is the size of remaining global gas, oil and coal reserves in terms of their CO2 potential. These come to 3,500Gt in total,

with coal taking the lions share.8 Unburnable carbon The figure shows that to remain within the 2C carbon budget, only a fraction of these resources less than 500Gt worth can be burned. This assumes very low emissions from non-energy sources of emissions (e.g. industrial processes, land-use, land-use change and forestry).

Likely

Probability of staying below 2 C

Probability of exceeding 2 C

More likely than not

Less likely than not

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of this decade, with the height of the peak determining the rate at which emissions need to decline thereafter. The German Advisory Council on Climate Change provides a number of scenarios: if emissions peak by 2015, then global emissions need to reach around zero by the 2050 mark; if emissions peak later, by 2020, then the rate of decline becomes more severe emissions must decline by an unlikely 9% per year to reach zero by 2040. Whichever curve one chooses, global energy emissions need to peak at no more than 34Gt before 2020 and fall to less than 20Gt of CO2 by 2030.9 The urgency of efforts to turn the global emissions trajectory around before 2020 has led numerous governments, Australias included, to note that we have entered the critical decade.10 On current trends, the world will use up its carbon budget by as soon as 2025. We are perfectly on track for a sixdegree Celsius rise in temperature, concluded Birol a path that will have catastrophic implications for all of us.11

Under the current negotiations, countries are also trying to reach agreement on reducing emissions from deforestation, international aviation and shipping, and on complex issues of international equity (including the provision of financial and technological transfers to developing countries to assist with mitigation and adaptation to climate impacts)16 all as part of the same grand bargain.

Box 2.2: Brief History of the UN Climate Process

The UNFCCC,17 negotiated in 1992, established a multilateral framework for international climate governance within the UN system. The UNFCCC enshrined the long-term goal of avoiding dangerous anthropogenic interference in the climate system and established a suite of institutions and rules for the negotiation and development of more detailed emissions reductions and related commitments. Notable developments over the UNFCCCs twenty year history have included: the negotiation (in 1997) and entry into force (in 2005) of the Kyoto Protocol, in which developed countries accepted binding emissions limitation targets to be achieved over the first commitment period, between 2008-2012;18 the Bali Action Plan (2007),19 which established two tracks for negotiating, by 2009 at Copenhagen, a suite of agreements to commence following the end of the first Kyoto commitment period;20 the Copenhagen Conference (2009) at which parties fell well short of reaching any such agreements but instead produced a three page set of high-level political commitments known as the Copenhagen Accord,21 which were translated into formal decisions on peripheral issues (not including emissions constraints for individual countries) a year later in Cancun (2010);22 the Durban Platform (2012), by which countries agreed to start another new negotiating process towards a treaty or other outcome with legal force to be negotiated by 2015 and take effect in 2020.23

2.3 The Deadlocked UN Climate Negotiations

Since the adoption of the United Nations Framework Convention on Climate Change (UNFCCC)12 in 1992, the international community has been trying to agree on cooperative international climate action that would prevent these afore-mentioned catastrophes from eventuating. It has been doing so within a top-down paradigm that we refer to as treaties, targets and trading.13 This paradigm aims to prevent dangerous anthropogenic interference with the climate system14 as follows: all 193 Parties to the UNFCCC (nearly every country in the world) negotiate, agree by consensus, and eventually sign and ratify a binding international agreement(s); the agreement imposes on each country an emissions reduction target entailing a reduction of that countrys total domestic emissions (i.e. those produced within its borders) against a historical baseline; those individual country targets add-up to a level of emissions reduction that stabilises concentrations of greenhouse gases in the atmosphere to an agreed level (e.g. 350, 450 or 550ppm), which translates to an agreed maximum level of warming (average temperature increases above pre-industrial levels);15 each countrys target leaves it with an emissions entitlement (an amount they are allowed to emit without exceeding their target) and these entitlements can be traded between countries via an international emissions trading mechanism; compliance with targets and related obligations is enforced through centralised international institutions;

This top-down paradigm is an ambitious, theoretically elegant response to the technical and moral challenges posed by climate change but it has been unable to deliver the results it has promised. Since countries began negotiating this grand bargain, global CO2 energy emissions have risen by around 50%.24 The Kyoto Protocol, the first commitment period of which expires at the end of 2012, has failed to make a significant impact on the global emissions trajectory (see Box 2.3) and no comprehensive regime for cutting emissions has been agreed to replace it. Successive conferences are hailed as important

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steps forward, but the positive spin barely conceals an increasingly stark reality.

FigurE 2.2

Box 2.3 The Flaws in the Current Paradigm: The Case of the Kyoto Protocol
The flaws in the current paradigm of climate action have been empirically demonstrated via the Kyoto Protocol. The Kyoto targets were meant to be a first step for developed countries in reducing their emissions and were only intended to result in an average 5% cut in developed country emissions below 1990 levels over the 20082012 period. With the 2012 end-date fast approaching, we now know how it will turn out:25 Russia and other former Soviet countries will beat their targets by a long way due to the collapse of their economies in the transition from Communism after 1990, gifting them millions of tonnes worth of surplus (or hot air) emissions allowances which they can trade with other countries (that this would result was known at the time of the negotiations in 1997 in fact, it was seen to be an important inducement for certain countries to sign).26 A number of eastern European economies were also affected by the post-Soviet collapse, which has made it much easier for the EU to meet its EU-wide Kyoto target an achievement also helped by the use of international offsets and the outsourcing of heavy industry and manufacturing to China (though Europe must receive some credit for meeting its targets partly through climate policy).27 Australia is on track to meet its target (of an 8% increase on its 1990 level emissions), albeit largely thanks to an accounting provision it inserted into the Kyoto Protocol at the 11th hour of the negotiations. The so-called Australia clause allows Australia to claim the emissions reduction benefit of post-1990 land-clearing reductions on private land, which mask the fact that our fossil fuel emissions have risen by around 44% since 1990.28 Japan will fail to meet its Kyoto target through domestic reductions, but made purchases of hot air allowances to make-up the shortfall.29 Canada is on track to increase its emissions by around 30% since 1990, putting it way in excess of its Kyoto target. Faced with the threat of enforcement action under the Protocol (additional obligations in the hypothetical second commitment period, post-2012) it has simply repudiated its obligations and withdrawn from the Protocol altogether.30 The US, having been instrumental in weakening the content of the Protocol during the negotiations, never ratified it at all and has increased its emissions well beyond its nominal 7% reduction target.

The delegate for Haiti rests before the second day of negotiations, December 2009, Copenhagen, Denmark31

10

There are important political, economic and cultural reasons why countries are not making ambitious emissions reduction pledges and why the major emitters (particularly developed countries including the United States) are not providing political leadership.32 These issues are beyond the scope of this report but, undoubtedly, the game of chicken being played by the United States and China the worlds two largest emitters has been a major barrier to progress.33 The US insists that it will not accept emissions reduction targets unless China (and other major industrialising countries like India and Brazil) also accept binding targets. Meanwhile, China and India remain reluctant to accept such obligations until the US and other developed emitters fulfil their differentiated responsibilities to lead, enshrined in article 3(1) of the UNFCCC. This crisis of leadership has crippled the negotiations for years. There are no signs that this will change anytime soon. Promises of a comprehensive treaty in the near future should be regarded with a high degree of scepticism. The Durban Roadmap (the latest international plan to negotiate such a treaty) in particular provides no real cause for hope that the deadlock can be broken. The Roadmap commits the parties to a new process for the negotiation by 2015 of a protocol, another legal instrument or an agreed outcome with legal force (a formulation that has been interpreted to mean very different things by different countries34), with the associated emissions reduction obligations to come into effect from 2020.35 But the Roadmap is nothing more than a (non-binding) agreement to negotiate an agreed outcome of unknown content and form. The last such roadmap the Bali Action Plan agreed in 2007 was meant to result in a binding agreement by the end of 2009 in Copenhagen. When it became clear that no such agreement would be reached in Copenhagen, the parties simply extended indefinitely the negotiating timetable and ultimately abandoned it in 2011. The process launched at Durban could likewise extend well beyond 2015

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perhaps to be replaced by another new roadmap in four or five years time. Even if an agreement were to be reached by 2015 and come into effect by 2020, it is likely to be too little, too late. Currently pledged emissions targets (on which any future treaty is likely to be based) come nowhere near to plugging the enormous disparity estimated by the UN Environment Program to be up to 18 billion tonnes between business as usual emissions and science-based estimates of the reductions required.36 Moreover, as discussed , the latest climate science suggests that global emissions must peak within the second half of the current decade the earlier the better if we are to have any chance of restraining global average temperature rises to within 2C. Holding out for inadequate emissions reduction obligations that might begin in 2020 is not an acceptable international policy response. Finally, even the inadequate commitments countries may make can easily be hollowed-out through complex accounting loopholes and through the provision of international offsets, many of which are of dubious quality, as the Kyoto experience has shown.37 In any case,

if such legally binding commitments become too onerous, countries can simply ignore them as Canada has ignored its Kyoto obligations. Of course, it is possible that, sometime in the future, countries will be able to agree to a comprehensive, topdown regime of targets that add up to a sufficiently riskaverse climate stabilisation goal, backed by effective verification and enforcement mechanisms. For this and other reasons, including the need to have a centralised repository of emissions data to track countries emissions, the UN process should continue. However, Australia and other countries cannot depend solely upon that process to deliver a sufficient solution. To do so would be a dangerous policy response to the extraordinary threat to Australian and global welfare posed by climate change. Countries must urgently develop new models of cooperation outside the UN process if large-scale emissions reductions are to be achieved in the timeframe required to preserve a safe climate a theme we return to in Chapter 5.

11

FigurE 2.3

Delegates rest during an all night plenary session, December 2009, Copenhagen, Denmark38

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References
1. Jessica Shankleman, IEA Warns Time is Running Out to Prevent Catastrophic Climate Change, Business Green (25 May 2012) http://www.businessgreen. com/bg/news/2179906/iea-warns-running-prevent-catastrophic-climatechange. 2. Based on a comparison of CO2 emissions from energy consumption between 1992 and 2010: US Energy Information Administration, International Energy Statistics, http://205.254.135.7/cfapps/ipdbproject/iedindex3.cfm?tid=90&pi d=44&aid=8&cid=regions&syid=1980&eyid=2010&unit=MMTCD. 3. Editorial, The Mask Slips (2011) Nature, Vol. 480, p 292, http://www.nature. com/nature/journal/v480/n7377/full/480292a.html. International Energy Agency, World Energy Outlook 2011 (2011) p 209, http://www.scribd.com/doc/72512781/World-Energy-Outlook-2011. 5. Extrapolated from, Malte Meinshausen et al, Greenhouse-gas emission targets for limiting global warming to 2C (2009) Nature, Vol 458, p 11581162, http://www.nature.com/nature/journal/v458/n7242/full/nature08017. html. 6. 7. Ibid. Adapted with permission from Meinshausen et al (2009). Estimates of global gas reserves in Meinshausen et al (2009) were based on end-2005 figures of proven gas reserves at the most conservative confidence level of proven reserves (WER 2007) - 176 trillion cubic metres (TCM), corresponding to 360GtCO2 of emissions if combusted to CO2 (ignoring potential fugitive methane leaks). Since 2005, new technology employed by the oil & gas industry such as advanced fracturing techniques have led to significant developments of unconventional gas resources such as shale gas and coal seam gas, leading to the IEA featuring a special issue with the World Energy Outlook 2011 asking Are we entering a Golden Age of Gas?. IEA WEO2011 estimates January 2010 Ultimately Recoverable Reserves of 404 TCM conventional gas, and a further 406 TCM unconventional gas. This is equivalent to 1655GtCO2. The authors note that URR is a less conservative estimation than proven reserves, however this gas could potentially be exploited with the new techniques mentioned earlier. For the mid-range estimate we have taken 50% of the difference between IEAs URR of 810 TCM and the WER estimate of 176 TCM, added to the original 176 TCM, giving a mid-range potentially recoverable reserve of 493 TCM, equivalent to 1008 GtCO2. See: Malte Meinshausen et al. Greenhouse gas emission targets for limiting global warming to 2C: Supplementary material, Nature (April 2009) Table S3, doi:10.1038/nature08017; 2007 Survey of World Energy Resources, World Energy Council, (2007) Table 5-1, p 161, http:// www.worldenergy.org/documents/ser2007_final_online_version_1.pdf; Are we entering a Golden Age of Gas?, International Energy Agency (2011) Table 2.1, p 49, http://www.iea.org/weo/docs/weo2011/WEO2011_ GoldenAgeofGasReport.pdf. 8. Carbon Tracker, Unburnable Carbon Are the worlds financial markets carrying a carbon bubble? (2011), p 6 http://www.carbontracker.org/wpcontent/uploads/downloads/2011/07/Unburnable-Carbon-Full-rev2.pdf. 9. WBGU German Advisory Council on Climate Change, Solving the Climate Dilemma: The Budget Approach (2009) p 16, http://www.wbgu.de/ fileadmin/templates/dateien/veroeffentlichungen/sondergutachten/sn2009/ wbgu_sn2009_en.pdf. 10. Australian Government, Australias Submission to the Rio+20 Compilation Document, (2012) p 10, http://www.environment.gov.au/rio/pubs/ compilation-draft-submission.pdf; Australian Climate Commission, The Critical Decade: Climate Science, Risks and Responses (2011) http:// climatecommission.gov.au/report/the-critical-decade/. 11. Fatih Birol quoted in Michael Specter, The Climate Fixers, The New Yorker

(14 May 2012) http://www.newyorker.com/reporting/2012/05/14/120514fa_ fact_specter?currentPage=all. 12. UNFCCC, Opened for signature 4 June 1992, 1771 UNTS 107 (entered into force 21 March 1994). 13. See Fergus Green, The Failure of Treaties, Targets and Trading and the Future of Australian Climate Policy, Inside Story (2 February 2012) http:// inside.org.au/the-failure-of-treaties-targets-and-trading/ and Time to Move Beyond Treaties, Targets and Trading, Inside Story (6 March 2012) http:// inside.org.au/time-to-move-beyond-treaties-targets-and-trading/. 14. UNFCCC (1992), art 2. 15. For the archetypical explanation of how this process is supposed to work in theory, see Ross Garnaut, The Garnaut Climate Change Review (2008) Ch 12. The causal relationship between each of these logical steps is, however, extremely complex and countries have struggled to define and agree on a precise set of objectives. For example, while many nations have clung to the goal of restraining global temperature increases to less than 2C, the Alliance of Small Island States and a number of other countries insist that the goal should be to keep increases below 1.5C. This disparity of objectives is reflected in, for example, the Copenhagen Accord paragraph 1 (which recognises the scientific view that the increase in global temperature should be below 2 degrees Celsius) and paragraph 12 (which calls for a consideration of strengthening the goal to 1.5C) and the Durban Platform preamble (which refers to holding temperatures increases in global temperature to below 2C or 1.5C). 16. For a summary of the issues on the UN negotiating agenda, see Fergus Green and Greg Picker, Comprehending Copenhagen: A Guide to the International Climate Change Negotiations (Lowy Institute for International Policy, November 2009). 17. UNFCCC (1992). 18. Kyoto Protocol to the United Nations Framework Convention on Climate Change, opened for signature 16 March 1998, 2303 UNTS 148 (entered into force 16 February 2005) art 3.1, Annex B. 19. Conference of the Parties, Report of the Conference of the Parties on Its Thirteenth Session, Held in Bali from 3 to 15 December 2007, Addendum Part Two: Action Taken by the Conference of the Parties at Its Thirteenth Session, UNFCCC, 13th sess, UN Doc FCCC/CP/2007/6/Add.1 (14 March 2008) p 3 (Decision 1/CP.13 Bali Action Plan). 20. One track was focused on achieving a second commitment period under the Kyoto Protocol and the other concerned with a broader range of issues, including emissions reduction obligations for developing countries (and related financial and technical assistance from developed countries) and reducing emissions from deforestation. 21. Conference of the Parties, Report of the Conference of the Parties on Its Fifteenth Session, Held in Copenhagen from 7 to 19 December 2009, Addendum Part Two: Action taken by the Conference of the Parties at Its Fifteenth Session, UNFCCC, 15th sess, UN Doc FCCC/CP/2009/11/Add.1 (30 March 2010) p 4-9 (Decision 2/CP.15 Copenhagen Accord). 22. See the formal documentation from the Cancun meeting at UNFCCC, Cancun Climate Change Conference November 2010, http://unfccc.int/meetings/ cancun_nov_2010/meeting/6266/php/view/reports.php. 23. Conference of the Parties, Report of the Conference of the Parties on Its Seventeenth Session, UNFCCC, Held in Durban from 28 November to 11 December 2011, Addendum Part Two: Action Taken by the Conference of the Parties at Its Seventeenth Session, 17th sess, UN Doc FCCC/CP/2011/9/ Add.1 (15 March 2012) p 2 (Decision 1/CP.17 Establishment of an Ad Hoc Working Group on the Durban Platform for Enhanced Action) paras 2, 4. 24. Analysis of US EIA International Energy Statistics. 25. Data relating to the below points can be accessed from UNFCCC, Kyoto

12

4.

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Protocol Data, http://unfccc.int/ghg_data/kp_data_unfccc/items/4357.php. 26. Dieter Helm, Climate-Change Policy: Why has So Little been Achieved?, Oxford Review of Economic Policy (2008) 24(2), p 211, 218; Gwyn Prins and Steve Rayner, The Wrong Trousers: Radically Rethinking Climate Policy (2007) p 10-11; David Victor, The Collapse of the Kyoto Protocol and the Struggle to Slow Global Warming (2001). 27. Helm, Climate-Change Policy: Why has So Little been Achieved?, p 218; Prins and Rayner, The Wrong Trousers: Radically Rethinking Climate Policy, p 10-11. 28. Andrew Macintosh, Reducing Emissions from Deforestation and Forest Degradation in Developing Countries: A Cautionary Tale from Australia, The Australia Institute, Policy Brief No. 12 (April 2010). 29. See, e.g., Adam Easton Poland Signs Deal to Sell Japan 4 Million AAU Emissions Credits, Platts (10 December 2010) http://www.platts.com/ RSSFeedDetailedNews/RSSFeed/ElectricPower/6663640; David Pilling and Fiona Harvey, Japan to Start Buying Carbon Credits, Financial Times (22 November 2007) http://www.ft.com/intl/cms/s/0/b45ad96c-9929-11dcbb45-0000779fd2ac.html; Greenhouse Gas Emissions in Fiscal 2010 up 4.2%, The Japan Times Online (18 April 2012) http://www.japantimes.co.jp/ text/nn20120418f3.html. 30. Canada Pulls Out of Kyoto Protocol, The Guardian (13 December 2011) http://www.guardian.co.uk/environment/2011/dec/13/canada-pulls-outkyoto-protocol. 31. Ghali Hassan, COP15-A-Haitian-delegation, 2009, http://homepagedaily. com/Pages/article8757-cop15-copenhagen-a-road-to-ecocide--by-ghalihassan.aspx. 32. For a discussion of these reasons, see Robert Falkner, Hannes Stephan and John Vogler, International Climate Policy after Copenhagen: Towards a Building Blocks Approach (October 2010) Global Policy, 1(3), p 252, 256257. 33. Ibid. 34. See, e.g., the differing interpretations of the Durban outcome by Australian Climate Change Minister Greg Combet (Certainly, in our view, it means we are negotiating a legally binding agreement that would bind all developing and developed countries) and Indian Environment Minister Jayanthi Natarajan (It does not imply that India has to take binding commitments to reduce its emissions in absolute terms): Greg Combet quoted in Adam Morton, Accord Won on Climate Deal, The Age (12 December 2011) http://m.theage.com.au/environment/climate-change/accord-won-onclimate-deal-20111211-1opu4.html; Jayanthi Natarajan quoted in No Binding Pacts Inked in Durban Climate Meet: Jayanthi Natarajan, The Times of India (22 December 2011). See also Lisa Friedman, India Hits Brakes on Durban Pledges; Poorer Nations Want Climate Talks to Accelerate, Climate Wire (8 March 2012). 35. Report of the Conference of the Parties on Its Seventeenth Session, UNFCCC, Working Group on the Durban Platform for Enhanced Action. 36. See UNEP, The Emissions Gap Report (2010) http://www.unep.org/ publications/ebooks/emissionsgapreport/. 37. See also below Chapter 4.2. 38. Developing Countries Condem Copenhagen Climate Agreement, San Francisco Sentinel (18 December 2009) http://www.sanfranciscosentinel. com/?p=53124.

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Part 3 Australias Carbon Footprint: The Sphere of Influence Approach

Contents
3.1 3.2 3.3 Introduction  16 16 17 17 18 20 20 20 20 22 The Sphere of Influence Approach Australias Domestic Emissions 3.3.1 Australias Absolute and Per Capita Domestic Emissions 3.3.2 Australias Domestic Emissions in a Global Context Australias Exported Emissions  3.4.1 Australias Exported Emissions Today 3.4.2 Australias Growth in Exported Emissions Australias Carbon Footprint under the Sphere of Influence Approach   

3.4

3.5

References 

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3.1 Introduction
How much does Australia contribute to the global climate crisis? Contrary to popular belief, there is no single way to determine a countrys carbon footprint. The size of Australias carbon footprint, therefore, depends on which sources of emissions we count, and which ones we exclude.
16
It is often said that Australia causes only 1.5% of the worlds emissions. This statistic refers only to Australias domestic emissions (those emissions released into the atmosphere within our borders). As we show in this chapter, even these are very high by world standards: Of 193 nations, Australias domestic emissions (around 540 million tonnes of CO2-e per annum) are the 15th largest in the world. Australias per capita domestic emissions are the highest in the developed world. Based on an equal apportionment among the worlds people of the global 2C carbon budget for 20002050, Australians consumed their full 50-year share in the first ten years. Even these figures seriously under-represent Australias true contribution to climate change. Australia is the biggest exporter of coal in the world and a large exporter of gas, with significant influence on global fossil fuel markets. The domestic emissions statistics ignore, among other things, the emissions embodied in these exported fossil fuels. In this chapter, we advocate a different model for conceptualising a countrys carbon footprint the sphere of influence approach and explain why it results in a more realistic characterisation of Australias contribution to climate change. Through a detailed examination of two of the biggest categories of emissions sources that fall within Australias sphere of influence its domestic emissions and its exported emissions from fossil fuels this chapter concludes that: Australias combined domestic and exported emissions account for 4% of total global emissions. Coal is responsible for some 80% of this combined footprint. When export emissions are added to domestic emissions, Australia jumps from the 15th to 6th biggest polluter globally. Our exported emissions are growing rapidly: Australia is on track to export fossil fuels equivalent to 1.8 billion tonnes of CO2-e per annum, almost twice as much as Saudi Arabia does today, and equivalent to the entire emissions of Indias 1.2 billion people. Australias combined domestic and exported emissions are on track to grow to 2.2 billion tonnes of CO2-e per year by 2030. This would be equal to 11% of the

allowable global carbon budget (for 2C warming) in that year. In sum, Australia bears remarkable responsibility for climate change given its size and therefore has a disproportionately high potential to alter the global emissions trajectory.

3.2 The Sphere of Influence Approach

In our globalised economy, a country can engage in a whole range of actions that are exclusively or partially responsible for causing greenhouse gas emissions somewhere in the world. Consider the example of Country A and the emissions in the following three activities in its economy: 1. A company in Country A extracts and combusts some of its own coal to produce electricity that is supplied to nearby households. 2. Another company in Country A exports some of its coal to be combusted in Country B. 3. A citizen of Country A imports a consumer product from Country C, the production of which required the combustion of coal in Country C. The emissions from which of these activities should be considered Country As emissions? Clearly, emissions from the first activity are attributable to Country A, since no other countries were proximately involved in the supply chain of the electricity.1 But what about the second and third activities? At the very least we can claim that country A is a partial or contributory cause of the emissions created in the course of both activities (along with countries B and C, respectively). As these examples illustrate, there are many different principles or approaches that could be devised for attributing responsibility for a particular tonne of emissions to a particular country. As explained in Chapter 2, the UN climate process has been built around one such approach, by which each country is responsible for accounting for its domestic emissions. There are good reasons why one might want to draw the line at the waters edge. If there were a comprehensive, legally binding and effectively enforced global regime of domestic emissions reduction targets in place, it would make sense for countries to concern themselves only with their respective domestic emissions. In these circumstances, for example, Australia could export fossil fuels to the world with full confidence that other countries were engaging in this fossil fuel trade in the context of safe limits on emissions. But no such regime exists. There are no controls ensuring

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the volume of fossil fuels being traded is consistent with a safe climate outcome. Nor, as we argued in Chapter 2, is such a regime likely to arise in the timeframe within which emissions reductions are required. It therefore no longer makes sense for us to confine our conception of a countrys carbon footprint to its domestic emissions. For the purpose of ascertaining how much a single country contributes to climate change, a more realistic approach is to consider that countrys carbon footprint in terms of the emissions within its sphere of influence. Every tonne of greenhouse gas emitted in the world can be conceptualised as lying on a spectrum that measures the degree of control or influence a particular country has over its production. In the case of purely domestic emissions (such as example 1, above), a country has full control over those emissions. Similarly, a country has full control over the emissions embodied in its fossil fuel exports. A country also has influence, though not full control, over the emissions caused overseas as a result of the production of goods and services that it imports. All of these emissions fall within a countrys sphere of influence and this is the case irrespective of whether they also fall within another countrys sphere of influence. Australia is today undertaking an immense, governmentbacked expansion of coal and liquefied natural gas (LNG) exports. Australia has sovereignty over its natural resources, and State and Commonwealth Governments possess the legal authority to determine whether, and the extent to which, those resources may be extracted, used and exported.2 Australian governments also have the capacity to determine how much to subsidise resource exploitation. Fossil fuel exports therefore clearly fall within Australias sphere of influence. Similarly, Australia has the capacity to control and regulate the range of goods
Figure 3.1
600

that enter through its borders, for example by requiring importers to hold licences, imposing quotas or tariffs on imports, or prohibiting the import of certain goods altogether (though its ability to affect the emissionsintensity of those goods that it allows into the country is less direct). The emissions associated with our imports therefore also fall within our sphere of influence. In conclusion, under the sphere of influence approach, Australias carbon footprint should be defined as the sum of its domestic emissions, emissions embodied in its fossil fuel exports and emissions caused as a result of its imports. Consistent with this approach, below we outline Australias domestic and exported emissions two of three categories3 of emissions sources in Australias sphere of influence to develop a more accurate account of our contribution to global warming.

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3.3 Australias Domestic Emissions

3.3.1 Australias Absolute and Per Capita Domestic Emissions
In 2011, Australia released a total of 540 million tonnes of CO2-e into the atmosphere (see Figure 3.1). Since 1992, when the UNFCCC was adopted, Australias emissions have grown almost 30%. Emissions from energy production contribute the lions share of Australian emissions, accounting for almost 80% of direct emissions today. In total, they reach around 417 million tonnes of CO2-e, representing growth of around

National inventory total (excluding Land Use, Land Use Change and Forestry - LULUCF), Carbon Dioxide equivalent4

500

400

Tonnes CO2-e

300

200

100

1990

1992

1993

1995

1996

1998

1999

2001

2002

2004

2005

2007

2008

2010

Energy

Industrial Processes

Agriculture

Waste

2011

1991

1994

1997

2000

2003

2006

2009

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44% since 1990.5 The emissions intensity of Australias energy system is more than 30% higher than the world average. There are but five countries in the world with a more emissionsintensive energy system: Bosnia Herzegovina, Estonia, Mongolia, North Korea and Poland.6 This is largely due to our dependence on coal-fired electricity. Transition countries like China and India are also coal-dependent and have electricity generation systems that are almost as emissions-intensive as those in Australia. Nevertheless, their per capita emissions are well below the OECD average due to high rates of energy poverty around 300 million Indians still go without electricity today.7

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3.3.2 Australias Domestic Emissions in a Global Context

How do Australias domestic emissions compare with those of other countries? In 2010, the worlds nations released around 33.4 billion tonnes of CO2-e (energy and other emissions, excluding Land Use, Land Use Change and Forestry).8 At around 540 million tonnes of CO2-e (energy and other emissions, excluding LULUCF), Australia is directly responsible for around 1.5% of these emissions.9 At first glance this may seem like an insignificant contribution but this is largely due to the number of players involved. There are 193 countries recognised by the UN, the majority of which have emissions contributions closer to 0.1%. In fact, Australia is the 15th biggest direct emitter of CO2-e in the world.10 Many countries that we would instinctively assume have an important contribution to make in reducing global emissions countries such as France, Italy and Spain have emissions at around the same level as our own.

The nations of the world can usefully be divided into three groups:11 The gigatonne emitters, with total emissions measured in the gigatonnes (billions of tonnes). This list is composed of China, India, Japan, Russia and the United States (and the EU, if it is imagined as one entity). Their emissions range from around 4% to 23% of the global total. The middle emitters, which are clustered around half a gigatonne. Australia is in the middle of this category, alongside countries such as Germany, South Korea, Mexico, and Spain. Their emissions range from around 1% to 2% of global emissions. The minor emitters, a long list of countries that emit from as little as tens of thousands of tonnes of CO2-e (New Zealand, Sudan, Lebanon) up to a couple of hundred millions of tonnes (Kazakhstan, Malaysia, Venezuela). Their emissions range from 0% to 1% of the global total. The 20 countries with the highest emissions including all the gigatonne and middle emitters account for around 81% of world CO2-e emissions while the remaining countries account for only 19% (see Figure 3.2). In a world where the UN recognises 193 nations, Australia sits clearly within this most important group. Looking at emissions per citizen shows that Australias emissions are immense in proportion to our small population. Australias domestic energy emissions per capita were 18.4tCO2-e per person in 2011, more than 2 times the OECD nation average of 9.0tCO2-e per capita and the highest among all countries in the Top 20 (see Figure 3.3).12 China may be the worlds biggest emitter, but the average Australian citizen still emits more than 3 times as much CO2-e as the average Chinese.13 Our high emissions per capita mean that we have already exceeded our portion of the global 450ppm carbon budget for 2000 to 2050. In the first 10 years of this century, we emitted all the emissions that would be allowed to us for the first 50 years (if we were to share out emissions quotas evenly between the worlds people, see Box 3.1). As a result, we are now rapidly eating into the carbon budgets of other nations. This demonstrates how unfair our greenhouse gas emissions are on those nations that have lower per capita emissions, particularly given that Australia is also one of the worlds wealthiest nations.

Figure 3.2

CO2 emissions (from fuel combustion) share of the 20 highest emitting countries14

CO2emissions

20topemitters 19% Restofworld

81%

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Box 3.1: Australias Carbon Budget

The global carbon budget for 2000-2050, explored in Chapter 2, can be apportioned to the nations of the world to guide each nation on its emissions responsibility over the period. The method recommended by the German Advisory Council on Climate Change (WBGU) is to distribute the budget equally according to population that is, to split it into an allowance of tonnes per person per year.15 Under the conventional 2C scenario, with a carbon budget of 1000Gt over the 50 years (see Chapter 2), the distribution of the global carbon budget proposed from 20002050 amounts to average yearly emission allowances of around 3tCO2-e per capita. Global per capita emissions

are well above that level, at 7tCO2-e. When population growth to 2050 is factored in, real emissions will need to 9/28/2009 fall to 1tCO2-e per capita or less by 2050. Australias share in this global carbon budget is 0.33%, or 3.3GtCO2-e. With our own domestic emissions of around 0.5Gt per year since 2000, Australia exceeded its 20002050 carbon budget 43 years early, in 2007. A more generous apportionment by the WBGU (see Figure 3.4) recalculates the carbon budget from the year 2010, giving Australia around 2.5Gt.16 Staying within this budget (without international carbon trading) requires a rapid reduction of emissions to zero by 2020. On our current trajectory, we are set to blow our budget by 2016.

19

Figure 3.3
9,000
Total CO2e (million tonnes)

17 Direct emissions from fossil fuel consumption CO2 from

Fossil Fuel Consumption

20 16 14 12 10 8 6 4 2 0
CO2e Per capita (tonnes/person)

8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 -

18

Domestic emissions Per capita

Scenario 2: Climate Compromise

Figure 3.4
T1 = 2010, T2 = 2050, TM = 2010, p = 2/3 Emission paths per capita for selected countries

Example emission reduction curves (selected countries) for a 2010-2050 carbon budget on an equal per capita basis18
20 18 16 14

Germany USA (& Australia) China India Burkina Faso Global budget per capita assuming constant annual emissions

t CO2 per capita

12 10 8 6 4 2 0 2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

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3.4 Australias Exported Emissions

3.4.1 Australias Exported Emissions Today
Few Australians are aware that their nation already exports carbon emissions equivalent to the entire direct emissions of Germany, the worlds fourth largest economy. In fact, Australia exports more emissions through fossil fuels, at 800 million tonnes of CO2-e each year, than any nation except Russia and Saudi Arabia.19

As a result of the coal and gas expansion, the Australian Government forecasts a multiplication of our already immense export emissions by as much as 2.2.25 That would see Australia export 1.8 billion tonnes of CO2-e every year26 around the entire emissions released by Indias 1.2 billion citizens today, or equivalent to the export emissions of almost 2 Saudi Arabias.

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The overwhelming majority of these export emissions are in the form of coal. With 27% of the global trade, Australia is the worlds number one coal exporter.20 In 2010 Australia also exported 872 billion cubic feet of gas in the form of LNG, equal to around 48 million tonnes of CO2-e enough to make Australia the worlds fourth largest LNG exporter.21

3.5 Australias Carbon Footprint Under the Sphere of Influence Approach

If we add Australias domestic emissions and export emissions together, Australias total carbon footprint today comes to around 1.2 billion tonnes of CO2-e, or 4% of the global total, giving Australia the worlds 6th largest carbon footprint (when countries emissions are adjusted to include exported emissions and net out emissions from fossil fuel imports). On a per capita basis, Australias combined footprint is the largest among all of the top 20 emitters. Excluding countries with a population of 5 million or less, Australia has the highest combined footprint per capita in the world (see Figure 3.5).27 Coal contributes some 80% of Australias total footprint, accounting for a total of 935 million tonnes of CO2. This represents around 7% of the worlds coal-related emissions, and is around 50% of the entire US coal-related footprint. Including the effect of the Clean Energy Future package and assuming the current fossil fuel export project pipeline is fully realised, Australias combined (domestic + export) energy emissions are on track to grow as high as 2.2 billion

3.4.2 Australias Growth in Exported Emissions

Australias coal exports are growing rapidly, projected to double from 2009 levels by 2020 and increase by a further 50% to 2035. In the near term, coal port expansions in Newcastle, Kooragang Island and Hay Point will increase coal export capacity by some 100 million tonnes - equal to around 240 million tonnes of CO2-e.22 LNG is growing in importance as Australias eastern seaboard becomes peppered with coal seam gas wells and other projects off the North-West shelf also come online. An annual growth rate of 5.5% from 2009 to 2030 will see total LNG exports multiply by a factor of four.23 By 2020, Australia is set to overtake Qatar as the worlds number one LNG exporter.24
Figure 3.5

Emissions from fossil fuel consumption and exports28

9,000 TotalCO2e(million tonnes) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000

CO2fromFossilFuelConsumption+Exports
60 50 40 30 20 10 0 CO2ePercapita(tonnes/person)

Totalfootprint Percapita

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tonnes of CO2-e by 2030. This comes to around 11% of the total global emissions allowable in that year for even the risky 2C pathway outlined in Chapter 2.29 These figures demonstrate that, far from being a small part of the problem, Australias contribution to global emissions is large, growing rapidly, and in remarkable disproportion to its population. An important implication of this finding is that Australia has considerable potential to influence the global emissions trajectory for better or for worse.
Figure 3.6

Box 3.2: Emissions Within Australias Sphere of Influence: Summary

Emissions within Australias sphere of influence include: Domestic emissions of 540 million tonnes of CO2-e (or around 417 million tonnes of CO2-e from fossil fuels). Under the Clean Energy Future Package, these are projected to rise above 600 million tonnes of CO2-e by 2030 (with energy emissions staying at todays level).32 Export emissions of 800 million tonnes of CO2-e. Current projections forecast export emissions rising up to 1.8 billion tonnes of CO2-e by 2030 (or around 3.5 times todays domestic emissions).33 If ranked alongside all other countries in the world, Australia is: The worlds 15th largest emitter (domestic only). The 1st in the OECD for emissions per capita (domestic only). The 3rd in the world for export emissions, with todays export emissions equal to more than 75% of Saudi Arabias. Current fossil fuel project pipelines suggest we may grow to become the largest export emitter, equal to almost two Saudi Arabias by 2030. The 2nd in export emissions per capita (of countries with a population above 5 million) The worlds 6th largest emitter (domestic and export emissions combined). Australias combined carbon emissions (domestic plus exported emissions) equate to around 4% of global emissions. Coal is responsible for around 80% of this combined total, accounting for 935 million tonnes of CO2 in 2012. This represents around 7% of the worlds coalrelated emissions today, and comes to around 50% of the entire US coal-related domestic and export emissions. By 2030, Australias combined domestic and export emissions are on track to grow to 2.2 billion tonnes of CO2-e. This would equate to 11% of the total global emissions allowable in that year for the 2C pathway outlined in Chapter 2.

21

Coal exports by country30

Country Australia Indonesia Russia United States 2010 (tonnes) 297,000,000 287,000,000 111,000,000 75,000,000 C02-e (tonnes) 709,000,000 660,000,00031 263,000,000 179,000,000 (%) 27 26 10 7

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References
1. Of course, there are few transactions that are truly domestic only. For example, Country A could have imported the machinery that comprises its coal-fired power generator, and the manufacture of that machinery could have resulted in greenhouse gas emissions. 2. Mineral resources are vested in state governments, however the Commonwealth Government has the power to make laws with respect to, among other things, trade and commerce with other countries, corporations, and external affairs: Commonwealth Constitution s 51(i), (xx), (xxix). 3. Because of the complexities associated with counting emissions associated with imported goods, we have not sought to quantify those emissions in this Chapter. However, we advocate that Australia introduce policies intended to reduce the emissions intensity of Australian imports. 4. Quarterly Update of Australias National Greenhouse Gas Inventory, September Quarter 2011, Australian Department of Climate Change and Energy Efficiency, Australian Greenhouse Emissions Information System (2012) http://ageis.climatechange.gov.au/. 5. National Emissions Inventory, Australian Department of Climate Change and Energy Efficiency (2012) Australian Greenhouse Emissions Information System, http://ageis.climatechange.gov.au/. 6. 7. Ross Garnaut, The Garnaut Climate Change Review (2008) Ch 7. WBCSD leads business engagement on sustainable energy for all in Asia, WBSCD (2012) http://www.wbcsd.org/Pages/EDocument/EDocumentDetails. aspx?ID=14271&NoSearchContextKey=true. 8. Glen Peters et al., Rapid growth in CO2 emissions after the 2008-2009 global financial crisis, Nature Climate Change, Correspondence (2012) 2, p 2-4 http://www.nature.com/nclimate/journal/v2/n1/full/nclimate1332.html. 9. Shaping a global solution, Australian Department of Climate Change and Energy Efficiency (2012) http://www.climatechange.gov.au/government/ international.aspx. 10. Ibid. 11. International Energy Statistics, US Energy Information Administration (Data Only) (2012) http://www.eia.gov; Conversion factors, Carbon Trust (2011) http://www.carbontrust.co.uk/cut-carbon-reduce-costs/calculate/carbonfootprinting/pages/conversion-factors.aspx; Population Data, World Bank (2012) http://data.worldbank.org/indicator/SP.POP.TOTL.. 12. Ibid. 13. Ibid. 14. CO2 Emissions From Fuel Combustion: Highlights (2011 edition), International Energy Agency (2011) http://www.iea.org/co2highlights/ co2highlights.pdf. 15. Solving the Climate Dilemma: The Budget Approach, WBGU German Advisory Council on Climate Change (2009) p 16, http://www.wbgu.de/ fileadmin/templates/dateien/veroeffentlichungen/sondergutachten/sn2009/ wbgu_sn2009_en.pdf. 16. Ibid. 17. Data from US EIA, Carbon Trust, World Bank, as per footnote 11, above. 18. Adapted from: Hans Joachim Schellnhuber, Terra Quasi-Incognita: Beyond the 2oC Line, Presentation at the International Climate Conference: 4 Degrees and Beyond (September 2009) p10, http://www.eci.ox.ac. uk/4degrees/ppt/1-1schellnhuber.pdf. 19. Data from US EIA, Carbon Trust, World Bank, as per footnote 11, above. 20. Ibid. 21. Keith Schaefer, How exporting LNG could bring serious wealth to the US, Resource Investor (9 April 2012) http://www.resourceinvestor. com/2012/04/09/how-exporting-lng-could-bring-serious-wealth-to-th. 22. Arif Syed and Kate Penney, Australian Energy Projections to 2034-35

Australian Bureau of Agriculture and Resource Economics (2011) http://www. bree.gov.au/documents/publications/energy/Australian-Energy-Projectionsreport.pdf. 23. Ibid. 24. David Winning, Australia adjusts to new energy role, The Australian (21 May 2012) (from The Wall Street Journal) http://www.theaustralian.com. au/business/wall-street-journal/australia-adjusts-to-new-energy-role/storyfnay3ubk-1226362016587. 25. Coal and LNG projections sourced from Syed and Penney, Australian Energy Projectionsto 2034-25. Conversion factors sourced from Australian Department of Climate Change and Energy Efficiency, National Greenhouse Accounts (NGA) Factors (2010) http://www.climatechange.gov.au/~/media/ publications/greenhouse-acctg/national-greenhouse-factors-july-2010-pdf. pdf. 26. Ibid. 27. Data from US EIA, Carbon Trust, World Bank, as per footnote 11, above. 28. Ibid. 29. Considering that all emissions pathways for staying within the 2C limit, as discussed in Chapter 2, require emissions to have fallen to 20Gt of CO2-e or below by 2030. At 2.2Gt of CO2-e, Australias total footprint would account for 11% of the emissions allowable in that year. 30. International Energy Statistics, US Energy Information Administration (2012) http://www.eia.gov. Conversion factors, Carbon Trust (2011) http://www. carbontrust.co.uk/cut-carbon-reduce-costs/calculate/carbon-footprinting/ pages/conversion-factors.aspx. Population Data, World Bank (2012) http:// data.worldbank.org/indicator/SP.POP.TOTL. 31. Note that Indonesias slightly lower emissions per tonne of coal ratio is due to the lower grade of its coal exports. The Indonesian Government is considering legislation to ban low-grade export coal unless processed into higher-value forms. See the US Energy Information Administration, http://www.eia.gov and Indonesias coal sector could take a hit from planned export ban, Fitch says, The Jakarta Globe (2012) http://www.thejakartaglobe.com/economy/ indonesias-coal-sector-could-take-a-hit-from-planned-export-ban-fitchsays/503427. 32. Australian Treasury, Strong Growth, Low Pollution (2011) http://cache. treasury.gov.au/treasury/carbonpricemodelling/content/report/downloads/ Modelling_Report_Consolidated.pdf. 33. Coal and LNG projections sourced from Syed and Penney, Australian Energy Projectionsto 2034-25. Conversion factors sourced from Australian Department of Climate Change and Energy Efficiency.

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Part 4 Australias Current Policy Settings: Explaining our Ballooning Carbon Footprint
Contents
4.1 4.2 Introduction  24 24 24 24 26 28 29 29 31 Six Problems with Australian Climate and Energy Policy 4.2.1 Arbitrary Targets, Low Ambition 4.2.2 Over-Reliance on Offsets: Green Carbon and Overseas Credits  4.2.3 Transition Gas  4.2.4 Hoping Against Reason for Carbon Capture and Storage 4.2.5 Insufficient Deployment Support for Renewables 4.2.6 Fossil Fuel Promotion Policies: Betting the Other Way 

References

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4.1 Introduction
If measured by the volume of climate policy activity and the extent of political and media attention, Australian policy makers have been extremely busy when it comes to climate change. Indeed, federal and state governments have implemented more than 300 emissions reduction programs and policies over the last 15 years.1 With the recent introduction of Australias Clean Energy Future package, Australia now has a carbon pricing scheme to add to this vast array of existing initiatives. Does this mean Australia is now destined for leadership on climate change? Is a clean energy future the new business as usual? Can we can switch off, sit back and let the markets do the rest, confident that Australia is doing its bit?
The Chapter 3 analysis of Australias carbon footprint, including our fossil fuel exports, shows that the answer is a resounding no. This chapter explains why that is the case by focusing on six problems with current Australian climate and energy policy. It concludes: Australias emissions reduction targets are not consistent with the global carbon budget to 2050 to achieve the 2C goal that the Australian Government has adopted let alone any reasonable calculation of Australias fair share of that budget. The Government is relying excessively on international offsets, green carbon (see Box 4.1) and the much vaunted gas transition. This least cost abatement mentality privileges more risky and less effective forms of abatement and undermines efforts to deploy renewable technologies that are essential for Australias urgent decarbonisation task. Reliance upon Carbon Capture and Storage (CCS) as a future solution to climate change is a risky and dangerous strategy if we continue to burn fossil fuels throughout this critical decade only to find that CCS is not the saviour it was hoped to be, the window for action will have closed. Taking into account the wide range of state and federal policies promoting the rapid exploitation of Australian coal and gas for export, Australian climate and energy policy is currently doing much more harm than good.

4.2 Six Problems with Australian Climate and Energy Policy

4.2.1 Arbitrary Targets, Low Ambition
The first problem with Australias climate policy is the arbitrary nature of, and low level of ambition implicit in, Australias emissions reduction targets. Australia has accepted: a medium-term target of a 5% reduction in Australias domestic emissions below 2000 levels by 2020 (with an offer to raise the 2020 target to 15% or 25% if certain stringent conditions are met by other countries); and a long-term target of 80% below 2000 levels by 2050.2 However, these targets are not consistent with the sciencebased global carbon budget to 2050 to achieve the 2C goal that the Australian Government has itself adopted let alone any reasonable calculation of Australias fair share of that budget (see Chapters 2 and 6). Moreover, these targets only cover Australias domestic emissions. Emissions embodied in fossil fuel exports are excluded, consistent with the UNs accounting rules (as explained in Chapter 2). This enables Australia to claim its policies are internationally compliant while fuelling global warming through its coal and gas exports, as we saw in Chapter 3.

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4.2.2 Over-Reliance on Offsets: Green Carbon and Overseas Credits

The establishment of Australias carbon pricing scheme is the Governments primary means of meeting Australias medium and long-term emissions targets. Critically, the targets determine the stringency of the cap on emissions that will apply to sectors covered by the scheme during the floating price, or cap-and-trade phase of the scheme that begins on 1 July 2015. The weaker the target, the looser the cap; the looser the cap, the higher Australias emissions will be. It can therefore be seen how Australias low-ambition targets translate into the wrong price signals to the Australian economy, triggering solutions that are not sufficient to meet Australias decarbonisation imperative. Additionally, the scheme has numerous design flaws that affect the level and quality of abatement Australia will achieve. These flaws include the reliance on offsets from green carbon (see Box 4.1) and from other countries. International emissions trading Internationally, Australia has strongly advocated that countries be allowed to achieve their emissions targets by buying unlimited amounts of international offsets (credits that represent emissions reductions that have nominally

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occurred overseas) as opposed to being required to achieve them through reductions within their own borders.3 Consistent with Australias international position, its carbon pricing scheme will allow the extensive use of international offsets by liable entities for compliance purposes each year from 1 July 2015: up to 50% of an entitys liability between 2015 and 2020 and an unrestricted amount thereafter.4 So far the Government has prescribed that international offsets from the UNs Clean Development Mechanism (CDM) will be allowed for this purpose.5 Credits from the highly over-supplied CDM market are currently at rock bottom prices and, according to climate economist Frank Jotzo, are likely to remain so for the rest of the decade, leaving Australian companies with cheap and easy compliance options under the Australian scheme.6 Green carbon Australia has taken a similarly flexible approach to green carbon (see Box 4.1). Through its international negotiating positions and its domestic climate change policies, Australia has sought to prioritise green carbon abatement over reductions in fossil fuels and other sources of emissions. In international climate negotiations, Australia has been influential in maximising the scope of land-based emissions removals for which it can obtain credit towards meeting

its targets, while minimising the sources of land-based emissions that would count as debits. Specifically, Australia: has taken the lead on the negotiation of land-use and forestry rules on behalf of its UN negotiating bloc, the Umbrella Group (a group of non-EU developed countries which advocates for international rules that allow the utmost flexibility in the types of abatement that count towards countries emissions targets);7 was influential in securing agreement to rules in the Kyoto Protocol that allow countries to count, without restriction, net removals from green carbon activities toward compliance with their emissions targets;8 negotiated the inclusion in the Kyoto Protocol of a clause that allowed Australia to receive a huge windfall gain from reductions in land-clearing that had already occurred, making the achievement of its Kyoto target a 3 inch putt;9 and has made its acceptance of a higher-than-5% 2020 target conditional on the international agreement of land use and forestry accounting rules that it deems acceptable,10 which would likely allow Australia considerable scope to continue to minimise the debits and maximise the credits from the forestry sector.11 Back home, Australian companies will also be able to enjoy the fruits of green carbon accounting. Kyoto-compliant green carbon abatement that is credited under the federal governments Carbon Farming Initiative will be able to be used for compliance purposes by liable entities under Australias carbon pricing scheme. While a 5% cap per liable entity on the use of such credits applies during the fixed price phase of the scheme, there will be no limit on the number of such credits that liable entities will be able to use under the cap-and-trade phase of the scheme.12 The problem with offsets Undoubtedly, reducing deforestation, increasing tree plantings and supporting overseas abatement are valuable components of global emissions reduction efforts. Indeed, if Australia is to go truly beyond zero emissions, we must necessarily remove more CO2 from the atmosphere through increased forest (and other land sector) abatement than we emit from all sources. Similarly, financing emissions reductions in developing countries is, in and of itself, an important contribution that Australia can and should make to the global emissions reduction effort, as we explain in subsequent chapters. But theres the rub: these efforts need to be additional to Australias reductions in fossil fuel, industrial and other emissions in order to be consistent with the 2C carbon budget. According to Treasury modelling of the carbon pricing scheme, Australias domestic emissions (which includes both green and brown carbon) will increase over the next 20 years and will return to their current levels by 2050, even if Australia implements the 80% reduction target

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Box 4.1: Green Carbon vs Brown Carbon

By green carbon we refer broadly to removals of CO2 from the atmosphere, or emissions of CO2 into the atmosphere, from the natural environments such as forests and soils. Under the UN carbon accounting system, green carbon goes by the name of LULUCF, referring to Land-Use, LandUse Change and Forestry. Activities within this category include: removals of emissions from afforestation and reforestation (planting trees) since 1990; emissions from deforestation (cutting down trees); and emissions and removals from forest management, cropland management, grazing land management and revegetation (accounting for which is optional under the Kyoto Protocol first commitment period). This can be contrasted with brown carbon or black carbon, which includes greenhouse gas emissions caused from the burning of fossil fuels, such as emissions of CO2 from the smokestacks of a power generator or from the tailpipe of a combustion engine vehicle. Other emissions that could be within this category include: fugitive emissions from the extraction and transport of fossil fuels, industrial process emissions (such as per fluorocarbons emitted from the smelting of aluminium); emissions from landfill waste and waste-water treatment facilities; and emissions from the agriculture sector.

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by 2050. The only way this is possible is through the importation of billions of overseas offsets enough to equal half of our abatement below business as usual (see Figure 4.2). Proponents of lowest cost abatement, including the Australian Government, would argue that this is unproblematic; the only relevant outcome is that Australian action causes a tonne of emissions to not be emitted or to be removed from the atmosphere somewhere in the world. But there are two problems with this view.

4.2.3 Transition Gas

The general expectation in government and industry is that the carbon pricing scheme will drive a switch from coal to gas-fired power. While there will be an increase in renewable energy generation, until 2030, it will be driven primarily by the Renewable Energy Target, not by the carbon price. When burnt in efficient combined cycle gas turbines, electricity from fossil gas can have in the order of one half to one-third of the emissions than the same amount of electricity from coal. Given the maturity of gas turbine technology and the abundance of gas in Australia, this has made it appear to be an attractive option for reducing emissions from electricity in the short-medium term. The fact that it is marginally more expensive with marginally lower emissions means it fits perfectly into the paradigm of lowest cost abatement. The theory being a gradually rising carbon price will at some point become just high enough to tip the economic balance from coal to gas. Climate Change Minister Greg Combet has made it clear that this is one of the main goals of the carbon pricing scheme: For baseload electricity generation it will be gas-fired electricity that we see emerge, and for that investment to be committed, we need a carbon price in the economy.17 The term transition gas is often used to refer to the idea that gas can be used to displace coal until some point in the future when some other technology becomes commercially and technically viable.18 However, for a number of reasons, the reliance on gas as a transition fuel is nonsensical. Fugitive emissions risk While gas generation technologies are typically less emissions-intensive than coal-fired equivalents, the more relevant comparison is between the full life-cycle emissions of coal-fired and gas-fired power. When lifecycle emissions are considered, the fuel switch from coal to gas is unlikely to result in a significant cut in Australias emissions. The life-cycle emissions of gas fired power depend on a range of factors, including fugitive emissions rates, the particular source of the gas and the extraction method used, and the specific type of power generation technology. In Australia, new sources of gas are most likely to come from coal seam gas (CSG). Little is known, however, about the fugitive emissions from the drilling, extraction and processing of CSG, which is a relatively new form of extraction. Recent analysis of the full life-cycle emissions of natural gas has shown that, due to additional emissions, such as fugitive methane emissions some 25 times more potent

26

First, international offsets (and green carbon) typically have a higher risk profile than most forms of Australian brown carbon abatement, even though they are treated as equivalent for accounting purposes.13 This means they are unreliable. Offsetting can produce higher net emissions than domestic brown carbon abatement. The possibility (albeit distant) of Australia relying on international offsets from avoided deforestation (REDD) schemes in developing countries presents an even greater threat to the integrity of Australias carbon market.14 Second, and more importantly, relying on offsets will delay and undermine the roll-out of technologies that are essential for Australias urgent decarbonisation task. Allowing international offsets will dampen the Australian carbon price and increase its volatility problems exacerbated by the lack of a long-term price floor.15 This creates substantial uncertainty for businesses looking to invest in renewable energy technologies that will last for decades.

Figure 4.1

Plantations in Gippsland, Australia16

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at warming the globe than CO2 on a 100 year timescale a switch to natural gas has no advantages over coal and would have no impact in reducing temperatures to at least 2100.19 The authors conclude that:20 Conservation, wind, solar, nuclear power, and possibly carbon capture and storage appear to be able to achieve substantial climate benefits in the second half of this century; however, natural gas cannot. The US National Oceanic and Atmospheric Administration observed average methane fugitive emissions rates from US oil and gas production fields of 4% (considerably higher than industry estimates), reaching as high as 7.7%.21 This means that alternative gas sources can have a stronger warming impact than brown coal. The absence of independent testing of actual fugitive emissions from Australian gas operations means the true lifecycle emissions from Australian gas are unknown, with unreliable industry estimates being the only source of methane emissions data.22 Because gas is the principal fuel on which the Australian Government has hinged Australias energy future, it is highly questionable whether even the minor reductions in emissions projected to be achieved from 2025 onward are likely to be realised. Dirty infrastructure lock-in The economic lifetime of a new power plant is in the order of at least 25 years, while the technical lifetime can stretch to over 50 years. Building new gas-fired power stations not only locks in fossil fuel burning on-site, it will drive investment elsewhere in the gas supply industry, requiring

extraction, processing and transport of a continual supply of gas to the power plant. The International Energy Agency has warned in their World Energy Outlook 2011 that lockin of fossil energy infrastructure is an urgent problem.23 On our current trajectory, by 2017 the world will have built enough fossil energy infrastructure that if allowed to run it will burn the entire allowable global carbon budget, meaning that all new power plants built after 2017 need to be zero emissions no gas, no coal, no oil. While fossil power plants could be shut down before their economic lifetime to avoid breaching the carbon budget, it would be inefficient and expensive. The IEA estimates that it would cost more than four times as much to compensate for the high emissions infrastructure.24 The implication for Australia is that if we need to have zero-emissions energy infrastructure in place in 20 years time, we need to build it today, not in 20 years. The transition to nowhere In summary, while the gas transition is a key plank of the Australian energy sector abatement plan in the eyes of government and industry, it is incompatible with the deep emissions cuts required to actually avoid dangerous climate change. As explained in the following section, while this incremental step is taken, the strategy for making deep cuts is to wait another two decades until yetto-be-invented technologies such as carbon capture and storage come through to save the day. This delay-andhope strategy (combined with the political rebranding of fossil gas as clean energy) is well captured by comments in May 2012 from Energy Minister Martin Ferguson, responding to criticisms of the incompatibility of current

27

Figure 4.2

Treasury carbon price modelling: domestic vs internationally sourced abatement25

1200 Mt CO2-e Abatement 2020 2050 152 897

1000

800

Domestic abatement 58

463

600

94

400

Internationally-sourced abatement 435

200

2010

2020 Without carbon pricing

2030 With carbon pricing

2040

2050 Including overseas abatement

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energy and climate policy with the necessity of immediate deep cuts in emissions:26 The challenge on climate change is to reduce emissions. Gas is clean energy. Carbon capture and storage is the potential solution to coal-fired power internationally.

on fossil fuel-based energy sources by capturing carbon dioxide emissions at their source and storing them in deep underground geological reservoirs the silver bullet CCS has been heavily supported and promoted by the federal government through its direct funding of domestic and overseas CCS projects and through its vigorous and well-funded advocacy of CCS technology.27 Australian federal and state governments have poured hundreds of millions of dollars into funding for CCS projects, infrastructure and research.28 Internationally, the federal government has invested in bilateral CCS partnerships that fund demonstration projects and provide capacitybuilding in developing countries, particularly China, through numerous federal agencies.29 While the industry claims that individual components of CCS separating CO2 from gas streams, CO2 compression and transport, and geological storage of CO2 are individually proven, the reality is that combining these on a fossil power plant represents a number of significant challenges. To date there are still no examples of even demonstration-scale projects capturing and storing even a significant fraction, let alone all, of the CO2 from a power station. As a technological solution, CCS is still on the starting blocks. A recent expert review of CCS progress in the UK recognised that while the process appears technically

4.2.4 Hoping Against Reason for Carbon Capture and Storage 28

In order to avoid the required changes to Australias fossil fuel-based economy, the Government has chosen to support highly risky technologies. CCS has not been technically demonstrated at commercial scale, is unlikely to be a viable solution to global fossil fuel emissions, is unlikely to be cheaper than renewable alternatives by the time it is commercialised (if ever), and entails significant legacy risks. Yet, the Australian Government is one of its most vigorous proponents. As the promise of CCS has diminished in the last few years with attempts to demonstrate the technology on power stations becoming mired in technical and financial challenges, it is timely to consider why and how it has occupied a special place in Australias approach to climate change. CCS has been a longstanding priority area of Australian climate policy. Touted as a means of continuing our reliance

Figure 4.3

Artist impression of failed Zerogen CCS project, Queensland, Australia30

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workable on paper, a key reason for delays and failures of recent projects was neither government nor industry being willing to accept the multiple layers of risk associated with a single project.31 CCS demonstration projects around the world have faced major setbacks and delays as the challenges with combining and scaling up the individual elements have become apparent, and many have fallen over altogether.32 Moreover, CCS carries significant storage risks. Recent research published in the Proceedings of the National Academy of Sciences has pointed to the high probability that earthquakes will be triggered by injection of large volumes of CO2 into the brittle rocks commonly found in continental storage sites. Because even small-to moderate-sized earthquakes threaten the seal integrity of CO2 repositories, the authors of the study conclude that large-scale CCS is a risky, and likely unsuccessful, strategy for significantly reducing greenhouse gas emissions.33 Despite the failures, setbacks and risks of CCS, the Australian Government has remained a staunch advocate of the technology, spending a similar amount of money on promoting its supposed benefits as it does on actual CCS projects. Most notably, Australia bankrolls an organisation called the Global Carbon Capture and Storage Institute. Established by the Rudd Government in 2008, the Institute has already received $253 million in federal government funding34 an amount the Institutes own chief executive, Brad Page, concedes is impossible to spend responsibly.35 Although the Institute employs some 78 staff, a Sunday Age investigation revealed that the Institutes members remain confused as to the organisations objectives and frustrated by its lack of tangible achievements.36 When asked what the Institute has actually achieved, Page responded that the Institute runs some very advanced, internet-based websites on which it publishes information from CCS projects around the world.37 In sum, reliance upon CCS as a future solution to climate change is a risky and dangerous strategy. If we continue to burn fossil fuels throughout this critical decade only to find that CCS is not the saviour it was hoped to be, the window for action will have closed.

to invest $10 billion into renewable energy, energy efficiency and other low carbon projects with a view to overcoming some of the barriers to commercialisation and deployment of associated technologies. Beyond Zero Emissions has pointed out that on its own, the CEFC will be limited in its ability to affect the type of technology deployed. Moreover, the funds will not actually add to the total amount of renewable energy generation in Australia and are open to being used for investment in projects using fossil fuels as an energy source.38 It is not impossible that the CEFC may be able to finance deployment of technologies such as concentrating solar thermal power, however initiatives like the CEFC are more appropriate when combined with other support policies. For example, while Germanys KfW state bank provides finance to renewable energy (AU$30 billion in 2010 alone39 compared to the CEFCs $10 billion over 5 years), the primary support mechanism is feed-in-tariffs (FiTs) for renewable energy. It is worthwhile pointing out that despite the negative attention in the media, Australias FiTs for rooftop solar photovoltaics (PV) have been quite successful in their goal of enabling deployment. In financial year 2010-2011 alone, AU$4 billion was invested in solar PV in Australia.40 While the state-based FiTs have not been managed as well as Germany has managed their national FiT system over the last decade, they do show that the policy is effective. In Chapter 7 we advocate a much more targeted and sophisticated set of deployment support policies to enable Australia to decarbonise its energy sector in the appropriate timeframe.

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4.2.6 Fossil Fuel Promotion Policies: Betting the Other Way

The Australian climate policy picture would not be complete without some consideration of Australias policies that incentivise the production and use of fossil fuels and assist energy-intensive and emission-intensive industries. When Australias climate policy efforts are balanced against its fossil fuel promotion policies, the true priorities of the federal and state governments come clearly into focus. As we explained in Chapter 3, Australia is undergoing an extraordinary boom in coal and gas exports with equally extraordinary emissions consequences. These projects and the emissions that stem from them have been facilitated by Australian federal, state and territory governments. Far from strictly regulating fossil fuels, resource-rich state governments are pursuing aggressively expansionist fossil fuel development policies.41 The federal government, meanwhile, offers considerable incentives to foreign investors to facilitate investment into major Australian fossil fuel-related projects. The Government designates those projects it considers to be of strategic significance as a having major project facilitation (MPF) status,

4.2.5 Insufficient Deployment Support for Renewables

Australias existing policy mix does not facilitate the kind of large-scale renewable energy deployment necessary for Australia to decarbonise its energy system. The carbon price will not lead to renewables deployment within a foreseeable timescale, and we explain in Chapter 7 why the Renewable Energy Target and Solar Flagships policies are inadequate. The new Clean Energy Finance Corporation has a mandate

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which means the Government acts as a one-stop shop to shepherd proponents through key regulatory approvals processes and into relationships with local suppliers.42 Technically, the scheme is industry agnostic, but the results speak for themselves: of the 17 projects that currently enjoy MPF status, 12 are energy/resource projects and 11 of these are fossil fuels projects.43 Australian governments also spend billions of dollars every year on subsidies for the fossil fuel industry and for energyintensive industries (despite Australia promising to abolish such subsidies at the G20 Leaders Summit in September 200944). An Australia Institute study in 2011 estimated that the federal government spends around $10 billion a year directly subsidising the production or consumption of fossil fuels.45 State and territory governments provide additional subsidies that benefit fossil fuel power generators and energy-intensive industries ranging from subsidised coal prices for black coal power stations in New South Wales46 to heavily subsidised electricity for aluminium smelters in Victoria along with support for fossil fuel infrastructure development.47 Australia currently offers around 8 to 12 times more in subsidies and rebates to fossil fuels than to any climaterelated policies (see Figure 4.4).48 When Australias expansionist fossil fuel policies are compared with Australias weak climate policies, it becomes patently clear how Australia is choosing to

utilise its abundant natural resource of both the fossilised and renewable variety. Its one small step for renewable energy; and one giant leap for fossil fuels.

30

Figure 4.4

Australian spending on fossil fuel subsidies vs climate change programs49

14000

12000

10000

8000

Fossil fuel subsidies and rebates

6000 Climate change programs

4000

2000

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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References
1. Grattan Institute, Learning the Hard Way: Australias Policies to Reduce Emissions (2011) p 3, http://grattan.edu.au/static/files/assets/35ea95b7/077_ report_energy_learning_the_hard_way.pdf. 2. Fact Sheet: Australias Emissions Reduction Targets, Commonwealth Government, http://www.climatechange.gov.au/en/government/reduce/ national-targets/factsheet.aspx. 3. International Institute for Sustainable Development (IISD), COP 6, 27 November 2000, Earth Negotiations Bulletin (2000) 12(163), p 12; Matthew Coghlan, Prospects and Pitfalls of the Kyoto Protocol to the United Nations Framework Convention on Climate Change Melbourne Journal of International Law, (2002) 3(1) p 165. Countries ultimately agreed a compromise position, by which the use of international offsets for Kyoto compliance purposes must be supplemental to domestic reductions: Kyoto Protocol art 6(1)(b), (d). There is disagreement as to what supplemental means in practice. 4. 5. Clean Energy Act 2011 (Cth) s 133(7). Commonwealth Government, Securing a Clean Energy Future (2011) p 107; Clean Energy Act 2011 (Cth) s 5; Australian National Registry of Emissions Units (ANREU) Act 2011 (Cth) s 4. 6. Frank Jotzo, Why the Government Must Keep the Carbon Price Floor, Climate Spectator (18 May 2012) http://www.climatespectator.com.au/ commentary/why-australia-must-keep-carbon-price-floor. 7. See, e.g., IISD, Report of the Third Conference of the Parties, Earth Negotiations Bulletin (13 December 1997) 12(76) p 6-7. On the Umbrella Group, see Farhana Yamin and Joanna DePledge, The International Climate Change Regime: A Guide to Rules, Institutions and Procedures (2004) p 45-46. 8. 9. IISD, Report of the Third Conference of the Parties, p 6-7; Kyoto Protocol arts 3.3, 3.4. Duncan Kerr, Labors Environment Spokesman at the time, quoted in Clive Hamilton, Scorcher: The Dirty Politics of Climate Change (2007) p 75. 10. Commonwealth Government, Fact Sheet: Australias Emissions Reduction Targets. 11. For example, measuring and accounting for emissions and removals within the category of forest management is extremely technically complex and will inevitably leave countries including Australia with considerable scope to develop self-interested approaches to accounting for forest management emissions and sinks. See, e.g., Australias submissions on forest management reference levels (FMRL) and the independent synthesis report of technical assessments of a number of countries FMRL submissions (showing wide variations): Commonwealth Government, Submission to the SBI and SBSTA February 2011 Forest Management Reference Level Submission, http:// unfccc.int/files/meetings/ad_hoc_working_groups/kp/application/pdf/ awgkp_australia_2011.pdf and Commonwealth Government, Submission to the SBI and SBSTA September 2011 Forest Management Reference Level Submission, http://unfccc.int/files/meetings/ad_hoc_working_groups/ kp/application/pdf/australia_290911.pdf; UNFCCC, Synthesis report of the technical assessments of the forest management reference level submissions, FCCC/KP/AWG/2011/INF.2, http://unfccc.int/resource/docs/2011/awg16/ eng/inf02.pdf. 12. Clean Energy Act 2011 (Cth) s 1336(b). The legislation giving effect to the CFI is the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth). 13. Regarding international offsets see, e.g., Sren E Ltken, Penny Wise, Pund Foolish? Is the Original Intention of Cost Efficient Emissions Reduction through the CDM Being Fulfilled? (UNEP Ris Climate Working Paper Series No. 1, June 2012) p 17-18; CDM Watch, HFC-23 and N2O Projects http:// www.cdm-watch.org/?page_id=451; Lambert Schneider and Lennart Mohr,

2010 Rating of Designated Operational Entities (DOEs) Accredited under the Clean Development Mechanism (CDM) (ko-Institut e.V, 2010); Roddy Boyd, SGS- the Designated Operational Entity of Choice? Climatico (24 January 2010) http://www.climaticoanalysis.org/post/cdm_sgs-the-doe-of-choice/. Regarding green carbon see, e.g., Lee Godden, et al., Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD): Implementation Issues, Monash Law Review (2010) 36(1) p 139, 146-149; Govindasamy Bala, et al., Combined Climate and Carbon-Cycle Effects of Large-Scale Deforestation, Proceedings of the National Academy of Sciences (PNAS), (2007) 104(16) 6550; Nicola Durrant, Legal Issues in Carbon Farming, Climate Law (2011) 4(2) p 515-533. 14. See, eg., Erik Olbrei and Stephen Howes, A Very Real and Practical Contribution? Lessons from the Kalimantan Forests and Climate Partnership (Australian National University Discussion Paper #16, 1 March 2012) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2041832; Erik Olbrei and Stephen Howes, For peats sake, we need an overhaul of forestry aid, Reneweconomy, 22 March 2012, ; Australian REDD #Fail in Indonesias Kalimantan Forests, ABC Radio Australia, 20 April 2012, http:// www.radioaustralia.net.au/international/radio/program/asia-pacific/ australian-redd-fail-in-indonesias-kalimantan-forests/931280; Tom Arup, $30m Sumatra forest deal in doubt after concerns over funding, The Age, 15 May 2012, http://m.theage.com.au/environment/conservation/30msumatra-forest-deal-in-doubt-after-concerns-over-funding-20120514-1yn48. html; Michael Bachelard, No Credits Due as Forests Plundered, The Age, 9 June 2012 http://m.theage.com.au/environment/no-credits-due-as-forestsplundered-20120608-201dy.html; Sid Maher, $30m Indon project a failure, The Australian (4 June 2012); REDDy and Waiting, The Economist, 11 June 2009. 15. Fergus Green, Dont Mention the Floor, Inside Story (14 June 2012) http:// inside.org.au/don%E2%80%99t-mention-the-floor/. 16. Michael Ryan, Plantations of Pinus radiata and Eucalyptus nitens in Gippsland (Victoria, Australia), http://www.globalcarbonproject.org/news/ ManagingForests.htm. 17. Combet: An early announcement was appropriate, ABC Lateline, 9 March 2011, http://www.abc.net.au/lateline/content/2011/s3159809.htm. 18. As is typically the case elsewhere, the CEF modelling assumes that these future technologies will primarily be CCS and enhanced geothermal. See, for example, the electricity sector generation modelling carried out by the Australian Energy Market Operator in their National Transmission Network Development Plan (2010) http://www.aemo.com.au/en/Electricity/ Planning/2010-National-Transmission-Network-Development-Plan. 19. Nathan Myhrvold and Ken Caldeira, Greenhouse Gases, Climate Change, and the Transition from Coal to Low-Carbon Electricity, Environmental Research Letters (2012) 7(1). 20. Ibid. 21. See Jeff Tollefson, Air Sampling reveals High Emissions from Gas Field, Nature News (7 February 2012), http://www.nature.com/news/airsampling-reveals-high-emissions-from-gas-field-1.9982. 22. BZE, Worley Base Case Baseless but Coal Seam Gas Still Worse than Coal (28 March 2012) http://beyondzeroemissions.org/media/releases/worley-basecase-baseless-coal-seam-gas-still-worse-coal-120328. 23. IEA, World Energy Outlook 2011 (2011) http://www.iea.org/w/bookshop/add. aspx?id=428. 24. Ibid. 25. Australian emissions in the core policy scenario, Australian Department of the Treasury (2011) Chart 5.2, http://archive.treasury.gov.au/ carbonpricemodelling/content/chart_table_data/chapter5.asp. 26. Martin Ferguson, quoted in David Crowe, Charities warned off demonising

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coal and gas industry, The Australian (14 May 2012) http://www. theaustralian.com.au/news/nation/charities-warned-off-demonising-coaland-gas-industry/story-e6frg6nf-1226354884254. 27. For an excellent overview and critique of Australias support for CCS, see Guy Pearse, Quarry Vision, Quarterly Essay 33 (2009). 28. See for example National Low Emissions Coal Initiative, Department of Resources, Energy and Tourism (2011) http://www.ret.gov.au/resources/ resources_programs/nleci/Pages/NationalLowEmissionsCoalInitiative.aspx. 29. See International Carbon Capture and Storage Project, Geoscience Australia, Australian Government (2012) http://www.ga.gov.au/ghg/projects/ international-ghg.html; CSIRO, CSIRO Technology Captures Chinas CO2 (2011) Australian Government. http://www.csiro.au/en/Portals/Multimedia/

Group/About_KfW/thematic_dossier/index.jsp. 40. Clean Energy Council, Clean Energy Australia 2011 (2011) Table 6, p 14, http://www.cleanenergycouncil.org.au/dms/cec/reports/2011/Clean-EnergyAustralia-Report-2011/Clean%20Energy%20Australia%20Report%202011.pdf. 41. See, e.g., LNP, The CANDO LNP Resources and Energy Strategy (2012) http://lnp.org.au/policies/grow-a-four-pillar-economy/resources-and-energystrategy; Tom Arup, Baillieu Set to Boost Brown Coal, The Age (20 March 2012); Paddy Manning, NSW to Press on with Coal Seam Gas: Hartcher, Sydney Morning Herald (15 May 2012) http://www.smh.com.au/business/ nsw-to-press-on-with-coal-seam-gas-hartcher-20120515-1yo6c.html. 42. Commonwealth Department of Infrastructure and Transport, Major Project Facilitation: Overview (2012) http://www.majorprojectfacilitation.gov.au/ overview.aspx. 43. Commonwealth Department of Infrastructure and Transport, Major Project Facilitation: Current MPF projects (2012) http://www. majorprojectfacilitation.gov.au/projects/index.aspx. The twelfth is an algal biofuels project. 44. G20, Pittsburgh Summit Declaration, para 24, http://www.g20.org/images/ stories/docs/eng/pittsburgh.pdf. 45. Richard Denniss, Complementary or contradictory? An analysis of the design of climate policies in Australia, The Australia Institute (February 2011) https:// www.tai.org.au/index.php?q=node%2F19&pubid=831&act=display. 46. Giles Parkinson, NSWs great big coal subsidy scandal, Climate Spectator (1 November 2011). http://www.climatespectator.com.au/commentary/nswsgreat-big-coal-subsidy-scandal. 47. Pearse, Quarry Vision; Bernard Keane, Aluminium Smelting: The Best Bang for your Fossil Fuel Buck, Crikey (10 March) http://www.crikey.com. au/2011/03/10/aluminium-smelting-the-best-bang-for-your-fossil-fuelsubsidy-buck/. 48. The Australian Conservation Foundation (ACF) estimates that fossil fuel subsidies outnumber government support for climate change mitigation and clean energy by around 12 to 1: Media Release: Australia Spends $11 Billion more Encouraging Pollution than Cleaning It Up, Australian Conservation Foundation (1 March 2011) http://www.acfonline.org.au/news-media/ releases/australia-spends-11-billion-more-encouraging-pollution-cleaningit; Bernard Keane, Our carbon addict tax system is stronger than a carbon price, Crikey, (3 March 2011) http://www.crikey.com.au/2011/03/03/ourcarbon-addict-tax-system-is-stronger-than-a-carbon-price/. 49. Comparison of the ACFs identified fossil fuel subsidies versus climate change programs, in millions of dollars, Australian Conservation Foundation (2011) http://www.crikey.com.au/2011/03/03/our-carbon-addict-tax-system-isstronger-than-a-carbon-price/?wpmp_switcher=mobile.

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CSIROpod/Capturing-CO2-Emissions.aspx; Department of Resources, Energy and Tourism, National Low Emissions Coal Initiative;Australian Energy Engagement with China & India, International Energy Agency (2009) http:// www.iea.org/papers/roundtable_slt/australia2_mar09.pdf; Minister for Resources, Energy and Tourism, Media Release, Australia-China Joint Study for Commercial Scale CCS Project (17 December 2010) http://minister.ret. gov.au/MediaCentre/MediaReleases/Pages/Australia-ChinaJointStudyForCom mercialScaleCCSProject.aspx. 30. Anna Blighs team wastes another $116m on controversial ZeroGen cleancoal debacle , Courier Mail (2011) http://www.couriermail.com.au/news/ queensland/clean-coal-plan-goes-to-zero/story-e6freoof-1226178916182. 31. Stuart Haszeldine, UK carbon capture and storage, where is it?, Energy and Environment (2012) Vol. 23, p 448. 32. Ibid; Clair Gough and Sarah Mander, Are we nearly there yet? A review of progress against CCS roadmaps in the UK, Energy and Environment (2012) 23 p 367. The Global CCS Institute has only identified 15 large-scale CCS projects in operation or under construction, capturing a mere 35.4MtCO2 per annum: Global CCS Institute, Global Status of CCS Update to the 3rd Clean Energy Ministerial (March 2012) http://cdn.globalccsinstitute.com/sites/default/ files/publications/37901/globalstatusofccsmarch2012final-opt.pdf. Compare these results with IEAs roadmap for CCS, which envisages 100 projects by 2020 and more than 3000 by 2050 to make even a modest contribution to global emissions reduction efforts: IEA, Carbon Capture and Storage Road Map (2010) http://www.iea.org/papers/2009/CCS_Roadmap.pdf. 33. Mark Zoback and Steven Gorelick, Earthquake triggering and large-scale geologic storage of carbon dioxide, Proceedings of the National Academy of Sciences (2012) 109(26), p 10164. 34. A further $80 million of federal government funding over the next five years has been allocated: Lenore Taylor, Waste of Energy or Fine Chance for a Ballroom Blitz?, The Age (17 June 2012) http://www.theage.com.au/opinion/ political-news/waste-of-energy-or-fine-chance-for-a-ballroom-blitz-2012061620h1t.html. 35. Lenore Taylor, Carbon Millions Squandered, The Age (17 June 2012) http:// www.theage.com.au/opinion/political-news/carbon-millions-squandered20120616-20h4x.html. 36. Ibid; and Taylor, Waste of Energy or Fine Chance for a Ballroom Blitz?. 37. Up in Smoke video containing televised interview of Brad Page by Lenore Taylor, Fairfax Media, available at http://www.theage.com.au/opinion/ political-news/carbon-millions-squandered-20120616-20h4x.html. BZE can confirm that the Institutes advanced website is indeed internet-based and can be located at http://www.globalccsinstitute.com/. 38. BZE, CEFC Bill Senate Committee Submission (2012) http:// www.aph.gov.au/Parliamentary_Business/Committees/Senate_ Committees?url=economics_ctte/clean_energy_corporation_bill_2012/ submissions.htm. 39. Energy turnaround in numbers, KfW, http://www.kfw.de/kfw/en/KfW_

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Part 5 Cooperative Decarbonisation: A New Paradigm for International Climate Policy

Contents
5.1 5.2 5.3 Introduction The Bottom-Up Reality Cooperative Decarbonisation 5.3.1 The Fundamentals 5.3.2 Small Group Cooperation  5.3.3 Unilateral Action   34 34 35 35 36 38 41

References

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5.1 Introduction
That Australia can claim to be complying with its Kyoto Protocol obligations and acting consistently with UN rules on carbon accounting, despite its strong recent growth in domestic fossil fuel emissions and its extraordinary fossil fuel export boom, illustrates how the lofty goals of the Treaties, Targets and Trading paradigm have been subverted by the technocratic imperatives of legal compliance and least cost abatement.
It is time for these noble goals to be met with noble actions. It is time to put leadership towards zero carbon prosperity at the heart of global efforts to avoid dangerous climate change. This chapter introduces a new way of thinking about international climate action the Cooperative Decarbonisation paradigm. This entails a more practicallyoriented, problem-solving approach to decarbonising the global economy, sector by sector, using a wide range of policies, measures, investments and cooperative structures. It concludes that: With the UN process deadlocked, the reality of addressing climate change at present is one of bottom-up action. Cooperative actions among small groups of countries focused on particular climate solutions provide significant potential for generating the emissions reductions required to avoid dangerous climate change. Countries should be prepared to take unilateral action where cooperation fails, employing a much wider range of mechanisms to equitably influence the global emissions trajectory. As the ZCA Stationary Energy Plan demonstrated, the costs of unilateral action are overstated and the benefits understated. Through actions of this nature, small groups of countries or even individual nations can act as catalysts for global cooperation.

The UN process adopts one particular paradigm of international cooperation, as we explained in Chapters 2 and 3. To recap, the underlying logic of Treaties, Targets and Trading is that international climate cooperation will evolve in a top-down way towards the creation of a single international solution. The solution will be in the form of a comprehensive international treaty containing a regime of targets that add-up to a safe climate emissions reduction objective. Under this paradigm, each country focuses on technical compliance meeting its target for domestic emissions reductions while ignoring other emissions within its sphere of influence. The overarching shared vision of the UNFCCC provides a valuable contribution to raising the political profile of climate change. In a different geopolitical context, the UN process may have succeeded in producing a useful treaty. But, as discussed, the process is deadlocked and unable to produce the urgent turnaround in global emissions required. The focus of international cooperation in the near-term should therefore move away from the quest to create a perfect, comprehensive regime and onto more pragmatic cooperative efforts: a bottom up approach that involves a range of different actions by states.1 Many climate activists abhor the notion of a bottom-up approach, claiming it cannot guarantee that sufficient cuts will occur to ensure a safe climate, or that it will simply allow the big emitters to continue to emit with impunity. But these criticisms miss the point. As has been shown by the last 20 years of failure, the UN system does not guarantee a sufficient outcome either. Nor does it hold the big emitters to account; it merely allows them to point to the failure of the process itself as an excuse for their own inaction. In any case, whether it is desirable or not, the bottom up approach is the reality for now and for the foreseeable future. Climate change is an extremely complex, global, inter-generational problem that must be addressed under conditions of significant uncertainty in a highly imperfect world of sovereign states. In this context, it is not helpful for countries simply to keep acting as if the top down approach will work eventually because it just has to. It may do one day, but, as we have shown, even the best case scenario under the UN negotiations would establish a treaty that does far too little, far too late to achieve safe climate objectives. It is time to embrace the complexity of climate change mitigation and figure out how to do bottom-up action in a way that dramatically increases the chances of preserving a safe climate. In short, we have to make bottom-up work.

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5.2 The Bottom-Up Reality

Climate change presents a challenging collective action problem. Since no country alone can reduce emissions sufficiently to ensure a safe climate, countries must cooperate to ensure the provision of a public good (a safe climate) that benefits everyone. But there are more than one means of achieving international cooperation a fact that 20 years of UN climate conferences seems to have obscured.

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5.3 Cooperative Decarbonisation

5.3.1 The Fundamentals
In thinking about a bottom-up response, we need a new paradigm that provides the underlying logic by which international climate cooperation should evolve. The paradigm we advocate is Cooperative Decarbonisation (CD) a practical, problem-solving approach to the decarbonisation of every emissions-intensive economic and social process across the globe within the timeframe necessary to preserve a safe climate driven by national leadership, and accelerated through international cooperation. The first three of these points refer to the action that is required and the mindset with which it must be approached. Consistent with this broad definition, we envisage a wide range of policies, measures and other actions falling within this paradigm. To qualify, actions must first be directed toward the decarbonisation of a particular economic or social process. That is, they must be focused on phasing down the greenhouse gas emissions associated with any such process to zero or very near zero, or on the development of technologies and processes that result in zero or very near zero emissions.
Figure 5.1

Secondly, the actions must genuinely be consistent with achieving zero emissions within the transition timetables necessary to preserve a safe climate. Crucially, this implies a focus on peaking global emissions before 2020 and rapidly phasing down thereafter, not waiting until 2049 and hoping for a breakthrough. Thirdly the approach must be practical and solutionsoriented, entailing systems thinking, collaboration, trialand-error and adaptive learning focused on genuine decarbonisation outcomes; not technical compliance with opaque accounting rules at the lowest possible cost. The last two points of the definition refer to the agents of this action. Since the focus of this report is on international cooperation, we emphasise the national leadership actions of individual state actors (countries), which can be accelerated through cooperation of various degrees with other state actors. Of course, we also envisage wideranging cooperation between states and non-state actors, including corporations, research institutes, universities, NGOs and citizens. But we argue that this must largely be driven through laws, investments and other actions of states, albeit in ways that enable more intense cooperation among non-state actors to occur.2 By national leadership, we envisage countries taking action that is above and beyond both what they are required to do by law, and even beyond what their fair share of the solutions might be. First, we envisage countries using whatever levers at their disposal to decarbonise all of

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Cooperative Decarbonisation compared with Treaties, Targets & Trading

Treaties, Targets & Trading Evolution of international Top-down cooperation One solution or multiple One comprehensive solution / grand bargain Locus of power (ideal) Centralised institutions Focus of policy model GHG emissions per se Policy mechanism Dominant mentality Focus of each country Outcome of each countrys efforts Underlying ethical principles (see Chapter 6) Legally binding treaties, emissions reduction targets and emissions trading Managerialist, technocratic, legalistic, coercive Technical compliance with legal liability to achieve domestic emissions target / lowest cost abatement Mutually exclusive efforts (each country assumes responses will add-up to precise target) Fair Shares (based on equal per capita entitlements; modified by historical responsibility for emissions and capacity to pay (Common but Differentiated Responsibilities) Cooperative Decarbonisation Bottom-up Multiple solutions each of which is partial Polycentric (multiple centres of power) Economic and social processes that directly and indirectly cause GHG emissions Wide array of general and specific policies and measures Systems thinking, problem-solving, structural change, cooperative Decarbonising each economic sector through whatever means at their disposal, unilaterally and through cooperation with others Overlapping efforts (each country cannot assume responses will add-up so must take individual or shared responsibility for all emissions within sphere of influence) Fair shares based on emissions within sphere of influence; modified by special responsibilities (based on scope of sphere of influence, capacity to pay, capabilities for climate solutions and leadership capacity)

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the emissions-causing processes within their sphere of influence. This is likely to involve a wide range of policies and measures, investments and initiatives. From market mechanisms that enable the widespread deployment of renewable energy to regulations prohibiting new fossil fuel developments; from changes to electricity market incentives to large-scale investments in public transport infrastructure. Second, we envisage countries cooperating to accelerate global decarbonisation efforts and providing assistance to other countries to do the same. This will be particularly critical in relation to transnational emissions-intensive processes (such as fossil fuel and primary product imports and exports, and aviation and shipping emissions) and in the provision of assistance to developing countries. Our expectation is that many of the solutions will be led by small groups of willing countries focusing on particular issues associated with decarbonisation. However, countries should be prepared to go it alone if cooperative overtures fail. We discuss the nature and benefits of these different approaches in turn, below.

Examples of cooperative groupings One type of grouping would focus on tackling particular causes of climate change. These groups would draw membership from countries that are major contributors to a particular problem, along with those that have the greatest interest in and capacity to provide resources to tackle the problem. The Climate and Clean Air Coalition (see Box 5.1) provides a good, albeit small, illustration of this type of grouping. The global conference on fossil phase-out we advocate in Chapter 8 could evolve into groups along these lines.

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Box 5.1: The Climate and Clean Air Coalition

The Climate and Clean Air Coalition is focused on practical, sector-based efforts to reduce Short-Lived Climate Pollutants, including soot, methane and some hydrofluorocarbons (HFCs), which cause harmful localised health and environmental impacts as well as contributing significantly to climate change.4 The Coalitions membership includes donor countries and developing countries that are especially affected by the localised impacts of such pollutants. Taking practical steps to reduce such pollutants is a classic example of a climate change mitigation strategy that draws on co-benefits. According to the Coalition, short-lived climate pollutants affect food and water systems and are the primary cause of 3.1 million air pollution-related premature deaths per year. Accordingly, quick actions such as the widespread adoption of advanced cookstoves and clean fuels have the potential not only to reduce climate-warming gases but dramatically reduce morbidity and mortality in the developing world.5

5.3.2 Small Group Cooperation

A new focus for international cooperation The primary means of international policy is state-state diplomacy the exertion by one government of influence or pressure on the government of another country or countries.3 This is traditionally done through either multilateral (many countries) forums or institutions, particularly in regard to global or regional issues, or through bilateral means (between two countries). Multilateral cooperation can, but need not, be universal, involving all (or nearly all) countries in the world. The UN climate process is a form of universal multilateralism that works on the basis of agreement by consensus between all countries. Bilateral and multilateral processes can be more or less formal, involving anything from mere political meetings (e.g. the G20) to more formal arrangements involving treaties and legal obligations and some central institutions (e.g. the UNFCCC), all the way through to highly legalistic regimes with centralised institutions and enforcement mechanisms (e.g. the World Trade Organisation and its Dispute Settlement Body). We argue that countries should shift their focus onto cooperating on particular, tangible aspects of the climate problem and its solutions (specific emissions-causing or emissions-reducing sectors, technologies or activities) and within smaller groups of countries, with more pragmatic membership criteria.

Another type of multilateral grouping would be focused on the development and deployment of zero emissions technologies and processes. These groupings would draw membership only from countries that have the greatest interest in cooperating on a particular issue, which may derive from a high capacity to innovate or manufacture particular technologies (deriving benefits from supplying them) or a high capacity to reap benefits from deploying the technologies (deriving benefits from deploying them at lower costs). By limiting membership to such countries, obstacles to progress are removed and a race to the top culture can be fostered among those countries that have naturallyaligned incentives to make progress toward particular climate solutions.6 Meanwhile the upfront costs and risks (of research, development, demonstration and/ or deployment) are shared among such countries. We discuss in Chapter 7 how groupings such as these could be harnessed to develop and deploy renewable energy.

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We recognise that the idea of this type of cooperation is not new, but we explain below what needs to change in order to make it more effective. Why tackling climate change in this way is more likely to succeed than the UN process While developing cooperative arrangements or forging agreements under the CD paradigm would inevitably involve considerable challenges (particularly in relation to fossil fuels), the benefits of tackling such vexed issues on their own and in smaller, interest-based groups are considerable compared with trying to do so within the UNFCCC.7 First, the process of decoupling issues into small parts of the problem, to be dealt with in smaller groups, enables progress to be made in areas where it is attainable while the central UN negotiations are stalled.8 Because the current paradigm is all-encompassing and seeks to address climate change through a grand bargain, its success is entirely hostage to politics (there is a saying in the UN climate process that nothing is agreed until everything is agreed). The small group approach is inherently more resilient to political deadlocks, as political disputes in one process need not infect progress in other areas. Such cooperative processes have been shown in other contexts such as trade and arms control to yield technical breakthroughs whilst generally building trust and confidence among participants and demonstrating the beneficial possibilities of cooperation (see Box 8.2 in Chapter 8).9 Second, the smaller, interest-based membership ensures disinterested parties are unable to interfere or dilute processes as they try to advance their interests, as often occurs in the UNFCCC.10 Oil exporting states, for example, have for many years held-up multilateral negotiations on reducing shipping and aviation emissions because they are dissatisfied with the lack of compensation developed countries are offering them for importing less of their oil as a result of climate change measures! This type of behaviour begs a simple question that proponents of the UN process struggle to answer: why let global emissions reduction be held hostage by the laggards? Third, the smaller membership and more intensive, single-issue focus allows greater scope for: the collection of information and the development of expertise; the identification of co-benefits for participating countries; and the provision of targeted technical assistance and incentive payments by developed countries to developing countries.11 Fourth, progress in smaller groups can result in the development of international norms (standards of conduct) that have legitimacy and become institutionalised beyond the groups membership history has shown that this can occur even in the absence of universal participation, for

example nuclear testing, anti-personnel land mines and law of the sea.12 An example of how norms regarding fossil fuels could evolve is discussed in Chapter 8. Possible Objections to the CD Paradigm Despite being convinced of the superiority of the CD paradigm given present geopolitical realities, we recognise that there are challenges. First, the CD paradigm does not necessarily entail a global framework for measuring, reporting and evaluating progress towards agreed global climate objectives. However, the UNFCCC and decisions made under it provides an adequate (if not perfect) framework for accounting for emissions for the purposes of providing this information and tracking progress. As explained in Chapter 2, we do not argue for the abandonment of this process, but rather the development of complementary cooperative actions within a different paradigm. As such, the emissions monitoring and reporting process under the UNFCCC should continue. In fact, it should be strengthened. In particular, there is a greater need for an international capability to synthesise global emissions data from all sources and provide up-to-date information about the gaps between decarbonisation efforts and emissions trajectories, cumulative emissions and the risks of climate impacts.13 Second, the CD paradigm does not entail a centralised means by which countries efforts can be calibrated to the achievement of a global goal and enshrined in binding legal obligations to achieve emissions targets. A bottomup paradigm by definition cannot depend on all countries agreeing specific, long-term responsibilities up-front, once-and-for-all. Again, we simply note that the conditions for such a regime do not currently exist, but that through actions within the CD paradigm they could be fostered. This could occur, for example, through building social capital in smaller cooperative groups, and through initiatives to bring down the cost of renewable energy and other zero carbon technologies. It can readily be seen how the sort of cooperative mechanisms we advocate can lead to opportunities down the track for more centralised, top-down forms of cooperation. Indeed, this is exactly why both paradigms are needed: achievements in each paradigm should ultimately make success within the other more likely. Moreover, it is not as though the CD paradigm necessarily ignores binding commitments that reduce emissions, it is just that these commitments are more likely to focus on the economic and social processes that cause emissions (such as coal and gas exports). Third, similar types of partnership arrangements have been tried before and have not fundamentally changed the game, therefore it could be argued that going down

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this path would be a distraction. For example, the AsiaPacific Partnership on Clean Technology and Climate (APP), inaugurated by the Bush Administration, established eight public-private task forces that aimed to reduce emissions through a practical focus on particular industry sectors such as steel, aluminium, concrete and fossil fuels.14 The Major Economies Forum takes a similar, practicallyoriented approach to clean technologies.15 The novelty of CD is that these types of initiatives are no longer viewed as peripheral in the way they are today. They must become extremely well-resourced and focused on delivering scalable zero-carbon solutions, such as those examined in the Zero Carbon Australia Plans, within the timeframes required. Moreover, the focus of these partnerships has not been sufficiently ambitious. The APP, for example, has a Cleaner Fossil Energy Task Force which is focused on CCS and scaling-up LNG, which the APP website refers to as a low emissions fuel. Patently, this would not meet the criteria for Cooperative Decarbonisation outlined above. Another example is the Forest Carbon Partnerships Facility, which brings together donor countries to provide funding to forested developing countries that undertake REDD readiness programs and, eventually, protect forests.16 There is an unfortunate emphasis within REDD-related institutions on the preparation of countries for inclusion in carbon markets with a view to offset generation for use by developed countries (we explain in Chapter 4 why this is problematic). While we recognise that REDD is extremely complex, the emphasis needs to shift onto halting deforestation as quickly as possible in addition to actions in other areas. CD is not a recipe for carte blanche (at least, no more than the status quo is). But it will, at least initially, entail an array of imprecise efforts at multiple levels of governance from the local to the global, working separately but in complementary ways towards a safe climate.17 The resulting outcome will not be the precise hitting of a global target at the lowest possible cost; it will be far less elegant than that. But as different approaches are trialled, fail and succeed, and as countries and non-state actors learn from these successes and failures, the focus will gravitate towards the most effective regimes and approaches, which can in turn be expanded and deepened.18 Ultimately, under the CD paradigm, political leadership is required. Below, we consider the sorts of leadership actions that countries can take even in the absence of cooperation from others. Chapters 7 and 8 further demonstrate that leadership under the CD paradigm can make a material difference to the global emissions trajectory. We turn now to thinking about the possibilities of unilateral action within this paradigm.

5.3.3 Unilateral Action

If benign diplomatic initiatives continue to fail to induce sufficiently transformative change then individual countries must be prepared to lead on their own. They must use whatever means at their disposal to decarbonise emissions-intensive processes within their sphere of influence and to pressure other countries into following suit. Such unilateral action can only succeed if countries taking it articulate a clear set of values or goals to which they aspire such as decarbonisation, poverty alleviation, and sustainable prosperity (see Chapter 6) and behave consistently with them, while expressing willingness to engage with other countries in regard to how this occurs in international fora. By leading by example and conforming to the standards they expect of others, countries gain credibility, help to establish new norms of behaviour and influence the actions of others. Unilateral actions by countries can range from the benevolent to the punitive. Starting at the benevolent end, the German Governments world-leading policies aimed at rolling out solar PV over the last decade have had an extraordinary global impact in bringing down its price. While Germany has engaged in multiple research collaborations relating to PV throughout this period,19 its policies were largely unilateral. Germanys solar rollout has been so ambitious that, by 2010, Germany was home to around half the worlds installed solar PV.20 Germanys solar PV policies are directly targeted at reducing PV prices, and have brought costs down by an incredible 65% since 2006.21 This essentially amounts to Germany subsidising solar for the rest of the world: Germany undertook the burden of investing in the technology when it was relatively expensive. Its efforts have allowed others to free ride by gaining access to cheaper PV. A short-sighted rationalist might have foregone those initial investments; instead, a far-sighted government saw a strategic opportunity. The economic rewards for Germany have been profound (see Box 7.5 in Chapter 7). Today, German innovation has spurred China, the US and other countries to join the PV rush, and its initial efforts have snowballed into a global PV boom. Another innovative example is the financial pledges by Germany and others currently being made to the Ecuadorian Government, via a UN Development Programadministered fund, for its conservation of, and forbearance to exploit the oil reserves under, the richly biodiverse Yasuni National Park in the Amazon Rainforest.23 Finally Norways strategic use of its sovereign wealth fund

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Figure 5.2

The Yasuni National Park, Ecuador: A worthy investment?22

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further expands notions of how states can act to influence issues like climate change. The $550 billion fund, in which Norway saves its oil and gas revenues from the North Sea, has become so large that it now owns more than 1% of the worlds shares, is Europes biggest equity investor and speaks for 1.7% of all listed European companies.24 The fund manager is putting climate change on the agenda of the companies in which it owns stakes, requiring them to analyse the impact climate change has on the companies activities, measuring the greenhouse gases they emit and setting clear targets for reducing them. It also invests directly in sustainability. The fund invested $1.2 billion into 232 Indian companies that support environmental sustainability and clean energy and has made billion dollar investments in forest preservation.25 At the punitive end of the spectrum of unilateral action, two types of measures could be utilised by leader countries: pricing emissions from international aviation and shipping, and border tax adjustments. The first type of unilateral impost that a leader country can apply is targeted at emissions from international flights and shipping voyages that arrive in or depart from the countrys ports and airports. Such emissions are not accounted for by any one country under UN rules, since they are international in nature. The policy measure involves subjecting those bunker fuel emissions to that countrys carbon pricing scheme or other emissions reduction policy. For example, in the absence of progress towards international agreements to address such

emissions in the International Civil Aviation Organization and the International Maritime Organization, the EU recently incorporated international aviation emissions within the EU Emissions Trading Scheme so that flights to and from Europe will need to pay a carbon price on the fuel used.26 The second type of unilateral measure involves the imposition of border tax adjustments on imports of goods that are not subjected to equivalent carbon costs in their country of origin. Such measures serve the combined purpose of maintaining the competitiveness of industries within the leader country that are subject to emissions reduction policies such as carbon pricing (reducing the oft-cited, albeit typically remote, possibility of carbon leakage) while encouraging laggard countries to enact similar measures on equivalent goods.27 The US climate protection legislation that passed the House of Representatives in 2009 contained border tariff adjustments of this nature.28 The Grattan Institute recommends that Australia adopt such border adjustments for steel and cement because, compared with compensating industries through the issue of free carbon units, it would be a more efficient and effective way of preventing carbon leakage in the only two industries that are at genuine risk of such leakage.29 To address equity concerns where the country of origin is a developing country, the revenue raised by the leader country from the tariff can be recycled to the developing country exporter in the form of investments in renewable

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energy or other forms of sustainable development. In both the EU airline case and the US border tariff case, the measures in question provoked an international outcry. This is precisely the point. The EU decision provoked vigorous complaint from a number of non-EU countries (though ultimately only China and India have prohibited their carriers from complying).30 China and India were also strident in their criticism of the proposed US measures.31 But this type of action will become increasingly necessary in the absence of international agreements to regulate emissions or international enforcement structures to discipline laggard states. While some commentators and politicians fret about the free trade implications of unilateral action,32 these concerns typically imply a subversion of climate-related concerns to free trade goals that is morally dubious given the threat posed by climate change. One might well ask, how many trade wars will there be in a world thats 2-7 degrees warmer? The food price spikes of 2008, which provoked riots in more than 30 countries and led grain exporters to cut off exports to food-importing nations, provided an ominous foretaste of the tenor of international relations in a warming world.33 In any case, concerns about trade wars are largely unwarranted as it is eminently possible to design carbon-related unilateral measures that are lawful and consistent with World Trade Organization (WTO) rules.34 Though they can be undertaken unilaterally, these types of restrictions can be imposed by a group of leader countries in order to preserve benefits to the leader group and incentivise action by non-participating laggards.35 The more states that engage in this this type of action, the more likely others will want to cooperate.

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References
1. See Ruth Greenspan Bell et al., Building International Climate Cooperation: Lessons from the weapons and trade regimes for achieving international climate goals, World Resources Institute (2012) p 38. 2. See, e.g., Adam Bumpus, Start a carbon tax? Thats so 1991. Clean innovation and partnerships is where its at, The Conversation (2 July 2012) http://theconversation.edu.au/start-a-carbon-tax-thats-so-1991-cleaninnovation-and-partnerships-is-where-its-at-8009. 3. In different social settings, influence may be exerted by a variety of different means, including setting an example, skilful persuasion, providing institutional support, the possession and communication of superior expertise or experience, the exercise of a formal position of authority (including traditional authority), and/or simply the possession of qualities that are admired by others: Robyn Eckersley, Does Leadership Make a Difference in International Climate Politics? International Studies Association Annual Meeting, San Diego, (1-4 April 2012) p 6. 4. 5. 6. 7. About, Clean Air and Climate Coalition, http://www.unep.org/ccac/About/ tabid/101649/Default.aspx. Short-Lived Climate Pollutants, Clean Air and Climate Coalition, http://www. unep.org/ccac/ShortLivedClimatePollutants/tabid/101650/Default.aspx. Bell et al., Building International Climate Cooperation (2012) p 5, 45, 48. Ibid., p 39-40, 43-44; Robert O Keohane and David G Victor The Regime Complex for Climate Change, The Harvard Project on International Climate Agreements: Discussion Paper (January 2010) p 12, 13. 8. 9. See generally Bell et al., Building International Climate Cooperation (2012) Chapter 1 and specifically page 50. Ibid., p 5, 40-41, 44-45, 56 (Chapter 1 generally). 10. Ibid., p 39-40, 43-44. 11. Ibid., p 17-19, 23-24, 44-45. 12. Ibid., p 35-36. 13. Fergus Green, Warwick McKibbin and Greg Picker, Confronting the Crisis of International Climate Policy: Rethinking the Framework for Cutting Emissions Lowy Institute Policy Brief (6 July 2010), p 10, 14-17. 14. APP, APP Public-Private Sector Task Forces, http://www. asiapacificpartnership.org/english/about.aspx. 15. About, Major Economies Forum, http://www.majoreconomiesforum.org/ about.html. 16. Home, The Forest Carbon Partnership Facility, http://www. forestcarbonpartnership.org/fcp/. 17. Elinor Ostrom, Polycentric approaches to climate governance Development and Economics Research Group, World Bank (2010) p 39. See also Thomas Heller Climate Change: Designing an Effective Response, in Ernesto Zedillo (ed.), Global Warming: Looking Beyond Kyoto (2008) p 115-144; Mike Hulme, Moving beyond Climate Change, Environment (2010) 52(3), p 15-19. 18. Daniel Bodansky and Elliot Deringer, The Evolution of Multilateral Regimes: Implications for Climate Change (December 2010) p 3-12; Ostrom, A Polycentric Approach, p 11, 35; Keohane and Victor, The Regime Complex for Climate Change, Robert Falkner, Hannes Stephan and John Vogler, International Climate Policy after Copenhagen: Towards a Building Blocks Approach, Global Policy, (October 2010) 1(3), p 252, 256-257; Gwyn Prins and Steve Rayner, The Wrong Trousers: Radically Rethinking Climate Policy (2007). 19. See, e.g., Australia-Germany Collaborative Solar Research and Development Program, Sydney University, http://sydney.edu.au/news/84. html?newsstoryid=9046. 20. Germany moves toward trimming solar power incentives, Reuters (13 January 2010) http://www.reuters.com/article/2010/01/13/us-germany-

solar-idUSTRE60C4OS20100113; For how long will Germany the worlds largest PV market?, Solarplaza (16 August 2011) http://www.solarplaza.com/ article/for-how-long-will-germany-remain-the-worlds-large. 21. Preisindex Photovoltaik, Bundesverband Solarwirtschaft (2012) http://www. solarwirtschaft.de/preisindex. 22. San Rafael Falls, located in the Yasuni National Park, Ecuador, ZME Science (2010) http://www.zmescience.com/ecology/environmental-issues/ecuadorwill-receive-3-6-billion-not-to-drill-for-oil-in-a-historic-pact-06082010/. 23. See http://www.mdtf.undp.org/yasuni; Melissa Fyfe, Meet Cash Deadline or the Drillers Move In, Sydney Morning Herald, (29 October 2011); Sophie Vorrath, Amazon: 1, Fossil Fuels: 0 in Mixed Greens: Australia (Still) Lags on Cleantech, RenewEconomy (5 June 2012). 24. Gladys Fouch, Norways Sovereign Wealth Fund: 259bn and growing The Guardian (20 September 2009) http://www.guardian.co.uk/business/2009/ sep/20/norway-sovereign-wealth-fund; Sophie Baker, Norway SWF told to invest in land as climate change hedge Financial News (21 May 2012) http:// www.efinancialnews.com/story/2012-05-21/norway-swf-told-to-invest-inland-as-climate-change-hedge. 25. Ibid. 26. Council Directive 2008/101/EC of 19 November 2008 Amending Directive 2003/87/EC so as to Include Aviation Activities in the Scheme for Greenhouse Gas emission Allowance Trading within the Community [2008] OJ L 8/3. While no countries have as yet undertaken unilateral measures to put a price on emissions from international shipping, the EU has established a formal working group to address the issue and a recent Report, jointly prepared by the University of Manchester and the Tyndall Centre for Climate Change Research, outlines the potential scope for unilateral action by the United Kingdom to address such shipping emissions: see Paul Gilbert, Alice Bows and Richard Starkey, Shipping and Climate Change: Scope for Unilateral Action (August 2010) http://www.tyndall.ac.uk/publications/research-report/2010/ shipping-and-climate-change-scope-unilateral-action. 27. John Daley and Tristan Edis, Restructuring the Australian Economy to Emit Less Carbon, Grattan institute (April 2010) p 12 http://www.grattan.edu.au/ publications/026_energy_report_22_april_2010.pdf. The measures could operate so that importers of goods competing with equivalent trade exposed industries in the leader country could be required to pay a price based on the leaders industry average emissions. This price could then be adjusted if importers could demonstrate that their actual production emissions were lower than the leader country average or that they were already subject to an equivalent carbon price or equivalent in their country of origin: see John Daley and Tristan Edis, The Real Cost of Carbon Pricing, Inside Story (23 September 2010) http://inside.org.au/the-real-cost-of-carbon-pricing/. 28. American Clean Energy and Security Act of 2009, H.R. 2454, 111th Congress. 29. Daley and Edis, Restructuring the Australian Economy (2010) . 30. See, e.g., Europe against the World, The Economist (16 May 2012) http:// www.economist.com/blogs/gulliver/2012/05/airlines-and-pollution; Tania Branigan, China Bans its Airlines from Paying EU Carbon Tax, The Guardian (online) (6 February 2009) http://www.guardian.co.uk/world/2012/feb /06/ china-airlines-european-carbon-tax. The European Court of Justice recently found the European scheme to be lawful: Air Transport Association of America and Others v Secretary of State for Energy and Climate Change (C336/10) [2011] OJ C 49. 31. International Centre for Trade and Sustainable Development, China, India lash out at talk of carbon tariffs, China Programme (2009) 13(25) http:// ictsd.org/i/news/bridgesweekly/50301/; China says carbon tariffs will harm global trade, China Daily (16 December 2012) http://www.chinadaily.com. cn/business/2009-12/16/content_9189672.htm; Amy Kazim, India attacks US carbon tariff plan, Financial Times (online) (1 July 2009) http://www.ft.com/

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cms/s/0/3b180c9a-65d4-11de-8e34-00144feabdc0.html#axzz20lnw8I00. 32. See, e.g., Tim Wilson and Caitlin Brown, Costly, ineffectual and protectionist carbon tariffs, The Institute of Public Affairs (December 2009); Frdric Simon, France plans to revive EU carbon tariff, The Guardian (18 May 2012) http://www.guardian.co.uk/environment/2012/may/18/france-eu-carbontariff. 33. Riots, instability spread as food prices skyrocket, CNN World (14 April 2008) http://articles.cnn.com/2008-04-14/world/world.food.crisis_1_foodaid-food-prices-rice-prices?_s=PM:WORLD; Javier Blas, UN Body Warns of Food Price Shock, Financial Times (5 January 2011) http://www.ft.com/intl/ cms/s/0/524c0286-1906-11e0-9c12-00144feab49a.html; Javier Blas, Trade: Export Ban Prompts Reviews of Security of Supplies, Financial Times (14

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October 2010) http://www.ft.com/intl/cms/s/0/89dfdf36-d65a-11df-81f000144feabdc0.html. 34. According to a recent joint report from the WTO and the United Nations Environment Programme, border tax adjustment measures will be WTOcompliant so long as: they display a close connection with essential climate change policy; they are non-discriminatory in application, so as not be a disguised restriction on international trade; and administrative due process is properly followed: Ludivine Tamiotti et al, Trade and Climate Change: A Report by the United Nations Environment Programme and the World Trade Organization, WTO Publications (2009) p 98103. See also Rudi Kruse Climate Change Regulation in Australia: Addressing Leakage and International Competitiveness Consistently with the Law of the WTO, Environmental and Planning Law Journal (2011) 28 p 297; Benjamin Eichenberg Greenhouse Gas Regulation and Border Tax Adjustments: the Carrot and the Stick, Golden State University Environmental Law Journal (2010) 3, p 283. 35. Keohane and Victor, Regime Complex for Climate Change (2010) p 12-13.

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Part 6 Australias Role in Cooperative Decarbonisation

Contents
6.1 6.2 6.3 Introduction  44 44 45 45 47 48 50 51 Cooperative Decarbonisation: What Should Individual Countries Do? Australias Responsibilities under Cooperative Decarbonisation 6.3.1 The Case for Australian Climate Leadership 6.3.2 International Equity  6.3.3 Australias National Interest  From Responsibility to Action 

6.4

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6.1 Introduction
Having articulated the basic concept and logic of Cooperative Decarbonisation, we now turn to ask: what should a single country do? And, more specifically, what should Australia do?
Within the Cooperative Decarbonisation paradigm states must assess their responsibility to contribute as a basis for determining the action they should take. This chapter outlines the basic principles that should guide countries under a bottom-up paradigm of climate action and applies these to Australia. It concludes: The precise responsibilities of a particular country with regard to the timing of its decarbonisation and its contribution of resources to the global effort will depend on a range of factors, including: its historical contribution to climate change; the scope of its sphere of influence over emissions-intensive processes; its financial resources; its special capabilities to contribute to decarbonisation efforts; and its capacity to lead. When these criteria are applied to Australia, there is a strong case that Australia should decarbonise rapidly, contribute substantially to global decarbonisation efforts and play a leadership role in facilitating international cooperation. The imperative to act consistently with international equity considerations strengthens the case for cooperative action by Australia and other developed countries. While much is required of Australia under Cooperative Decarbonisation, these actions are consistent with Australias national interest.

this involves domestic decarbonisation, but thinking about our contribution in terms of our sphere of influence invites us to consider a more expansive set of policy responses aimed at the full range of global emissions over which we can exercise control or influence. This includes responsibility for influencing the emissions-related actions of others (while taking equity considerations into account), and recognising that we already influence these actions through our extensive participation in global fossil fuel markets. This approach accepts that, as with most international issues we face today from financial crises to global poverty to nuclear proliferation responsibility for emissions in a globalised world cannot be so easily quantified and demarcated at national borders. Addressing climate change in this context requires forms of international cooperation that are concerned much more with the (often transnational) economic and social processes that cause emissions than with tonnes of emissions that happen to fall within one or another countrys borders. None of this is to say that every country should decarbonise at the same pace or contribute equal resources to global decarbonisation efforts. Rather, we emphasise that this should be the basic guiding logic applicable to every countrys climate actions in the same way that lowest cost domestic abatement provides the guiding logic for individual country actions within the current paradigm, even though not every country approaches this in exactly the same way or to the same extent. The more precise responsibilities of any particular country with regard to the timing of decarbonisation and the extent of their contribution of resources to their own and global efforts will necessarily depend on a range of factors.1 These include, with regard to any country: its historical contribution to climate change; the scope of its sphere of influence over emissions-intensive processes; its financial resources; its special capabilities to contribute to decarbonisation efforts; and its capacity to lead.2

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6.2 Cooperative Decarbonisation: What Should Individual Countries Do?

As applied to a single country, the basic logic of the CD paradigm is that each country takes responsibility for: 1. decarbonising those emissions-intensive economic and social processes within its sphere of influence (i.e. domestic emissions, exported emissions and emissionsintensive imports); and 2. cooperating with other countries to facilitate that decarbonisation by whatever means is most appropriate. For an individual country, including Australia, operating under the assumptions of the CD paradigm necessitates a substantial shift in the way we think about our contribution to climate change. As argued in Chapter 5, under the CD paradigm, countries should reduce emissions wherever possible within their sphere of influence. At the very least,

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6.3 Australias Responsibilities under Cooperative Decarbonisation

Below, we explain the reasons why Australia should take a leadership role in global decarbonisation efforts. In making this argument, we recognise that there are many other imperatives and goals that must be taken into account in advocating this type of leadership.3 As such, we also address two of these additional considerations, namely: international equity: the imperative for developed countries to decarbonise more rapidly than developing countries, and to provide assistance to developing countries so that decarbonisation contributes to sustainable development and poverty alleviation; and the national interest: the imperative for Australia to ensure that its actions serve Australias long-term national interest. We argue that, far from making trade-offs between achieving decarbonisation, international equity and acting in the national interest, these three objectives are intertwined and mutually reinforcing.

measure causal responsibility for emissions on a sphere of influence basis, apportioning shared responsibility for imports and exports, the case that Australia must decarbonise rapidly is even stronger. Special Capabilities to Provide Climate Solutions Australia, as we have shown, has immensely high and growing emissions from the fossil fuels it exports. The fact that we have full control over these emissions enlarges Australias responsibility to decarbonise rapidly, as noted above. But the scale of Australias exported emissions also highlights Australias unique capabilities to influence the global fossil fuel trade. The scale of Australias fossil fuel exports also makes Australia a central player in the global coal and LNG trade, conferring on it unique capabilities to influence the supply and price of those commodities. Those abilities arguably give rise to a special responsibility for Australia to contribute to global emissions reduction efforts associated with coal and gas. In Chapter 8, we show how Australia can discharge this special responsibility and the profound impacts that such action is likely to have in reducing global emissions, shaping global energy markets and strengthening relevant international norms. Australia also has world class renewable energy resources in solar and wind and excellent capabilities in infrastructure services (finance, project management, engineering and construction). As such, Australia has an immense capacity to contribute to the deployment of zero emission technologies and associated services, giving rise to a special responsibility for Australia to make global contributions in those areas. In Chapter 7, we explain how Australian could play a leading role deploying commercially available technologies, particularly CST, at home and abroad, thereby significantly reducing the cost of those technologies for energy users all over the world. While the focus of Australias decarbonisation efforts should be on deployment, as we discuss in Chapter 7 there is also a strong case for global research, development and demonstration (RD&D) of new zero emissions technologies. Australias strong research and technical capabilities arguably extend Australias special responsibilities to encompass the provision of a considerable share of targeted investment into RD&D for new zero emissions technologies. Australias immense capacity to gain advantages from low cost renewable energy technologies should provide more than adequate incentives for Australia to invest in this realm.

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6.3.1 The Case for Australian Climate Leadership

There is a strong case that Australia should decarbonise rapidly, contribute substantially to global decarbonisation efforts and play a leadership role in facilitating international cooperation. Domestic Decarbonisation The conclusion that Australia has a responsibility to decarbonise rapidly is evident even from a strict application of the traditional, fair shares approach, based on its domestic emissions alone and its capacity to pay.4 Despite having a relatively small population (0.3% of the current world total, the 52nd biggest in the world), Australia is historically responsible for a high level of domestic emissions. As discussed in Chapter 3, Australia is currently the worlds 15th largest domestic emitter and is the highest developed country per capita emitter. It is also the 14th largest emitter in terms of cumulative historical emissions.5 Moreover, as the worlds 13th largest economy by GDP with one of the worlds highest levels of GDP per capita, we enjoy very high wealth by global standards.6 Australias high current per capita and historical emissions, and its capacity to pay, Australia has a responsibility to decarbonise rapidly compared with other countries. Under the calculation of fair shares in the context of a 2C carbon budget developed by the German Advisory Council on Climate Change, countries with high per capita emissions such as Australia must reduce emissions to zero by 2020 (see Figure 3.4 on page 19 of Chapter 3).7 If we

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Capacity to provide leadership Australia is in an outstanding and near-unique position to play a global leadership role in cooperative decarbonisation efforts. This position arises largely from Australias wide sphere of influence over global emissions-intensive economic and social processes, high capacity to pay and numerous special capabilities for providing climate solutions, all of which are discussed above. Additionally, Australia has an historical identity as a leader and is socially recognised by other states as a legitimate leader in international affairs.8 Each of these attributes is evident from Australias rich tradition of creative and effective middle power diplomacy, for which it has an unusual flair (see Box 6.1).9 Spanning fields as diverse as environmental protection, human health and safety, international security and regional peacekeeping over the last quarter of a century, bipartisan examples of bold and effective Australian leadership are presented in text boxes below and in Chapter 8. These case studies show that when history has required far-sighted leadership to protect our natural environment,

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promote peace and security, or respond to common threats, Australia has on many occasions risen to the challenge despite the fact that in narrowly defined terms, our national interest has often not been at stake. A resourceful and influential middle power, Australia has shown itself capable of mobilising coalitions, injecting good ideas, establishing new norms, cajoling other countries and industries and, most importantly, producing results on the international stage that serve the longterm interests not only of Australians, but of people everywhere.16 Importantly these examples also attest to the fact that Australia is generally well respected and trusted in international affairs and is often looked upon by the international community as a source of moral leadership, particularly when the great powers are found wanting or are mistrusted.17 Of course, as we have shown above, Australia is much more than a middle power when it comes to climate change: it is a major player. Although it currently uses its influence largely to fuel the problem, it has enormous potential to use its power for good.

Box 6.1: Regional Peacekeeping: Cementing the Cambodia Peace Process and Beyond
Australias leadership role in the Cambodian peace process of the late 1980s and early 90s stands out as an early example of far-sighted leadership in circumstances where our security interests were not directly threatened. In the aftermath of Pol Pots brutal Khmer Rouge regime, Cambodia remained politically divided and racked by internal conflict. The conflict was characterised by extremely complex internal and international dynamics: most of Cambodia was under the control of a regime supported by Vietnam and the Soviet Union; and the main military opposition was composed of three separate Khmer factions, supported to varying degrees by China, the ASEAN countries and the US.10 In 1989, following years of unsuccessful peace negotiations between the major stakeholders, the negotiations around the Cambodia peace process seemed intractable. With Vietnamese forces leaving the country and no agreement on the composition of a future government or the potential role of the Khmer Rouge, ongoing conflict seemed inevitable. The breakthrough in the negotiations was a product of Australian diplomacy.11 The Australian Government drafted a peace plan based on its proposal for a greater role for the United Nations in the civil administration of Cambodia for a brief, transitional period. The Australia Plan was successfully promoted by Australia to the parties to the conflict and to the international community.12 Having built consensus around the plan, Australia then provided strong support to the UN Transitional Authority in Cambodia (UNTAC), supplying the military commander for the UNTAC operation and over 500 communications personnel, police officers and electoral supervisors, along aid and humanitarian support.13 The UN peacekeeping process ultimately produced an effective resolution to the conflict. Being of secondary size does not mean being secondrate in international affairs, affirmed Australian Foreign Minister Gareth Evans at the time: we can as a middle power effectively deploy our resources not only in a way that advances our own interests, but in a way that helps to make the world a better and safer place. A middle power like Australia, says Evans, can do a great deal using techniques of coalition building and niche diplomacy, paying careful attention to priorities and credibility maintenance, exercising intellectual creativity at the right times, and through sheer persistence and stamina.14 Political leaders expressed similar sentiments in characterising later Australian interventions in the region. As then foreign minister Alexander Downer noted in 2007, Australias involvement in the Pacific region has been about more than pursuing narrowly defined national interests there is a large element of altruism in what we do.15

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6.3.2 International Equity

We unashamedly take the position that achieving the imperative of a safe climate through Cooperative Decarbonisation must be the starting point for, and highest priority of, countries energy and climate change policies this decade and beyond. The reason for this is simple: without climate stabilisation at safe levels, all other benevolent or progressive goals of international policy would become unattainable.18 There are, of course, other international policy imperatives worth striving for, and to which resources should be allocated. One of these worth highlighting is poverty alleviation. Some 1.4 billion people around the world live below the international poverty line of $1.25 per day.19 One of the UNs Millennium Development Goals is to reduce that number to 900 million by 2015.20 Moreover, there are some 1.3 billion people around the world who do not have access to electricity and 2.7 billion with unsafe cooking stoves more than 95% of these people live in Sub-Saharan Africa or developing Asia and 84% live in rural areas.21 The lack of access to modern energy services is a serious hindrance to economic and social development, and must be overcome if the UN Millennium Development Goals are to be achieved, argues the International Energy Agency.22

Making reliable energy available to the worlds energy poor is important, but making reliable clean energy available to all the worlds people is the goal we should really be striving for. Yet this raises a conundrum: in the short term, addressing climate change necessitates that global energy prices rise to better reflect the damage costs associated with burning fossil fuels and to facilitate the essential growth in renewable energy. As we show below, many of the worlds energy poor are not especially affected by fossil fuel prices because they are not connected to the grid. But, to the extent they would need to, is it right that people in developing countries should pay relatively higher prices for clean energy in order to address a problem largely caused by developed countries? Arguably it is not. So what should be done? One argument is that we should supply ever more coal and gas to developing countries because it is a cheaper way of alleviating poverty and powering economic development in lower-income countries. There are three reasons why this approach is flawed (see Box 6.2). Rather, to ensure that decarbonisation efforts are consistent with international equity considerations, Australia and other countries should undertake three types of measures. medical journal, The Lancet, the health benefits of mitigation policies to reduce fossil fuel electricity consumption greatly offset costs of greenhouse-gas mitigation, especially in India where pollution is high and costs of mitigation are low, with modelling suggesting clear health gains (co-benefits) through decarbonising electricity production.25 While it is reasonable to expect differing results from different locations, it seems likely that in urban mega-city situations (which is largely the destination of Australian coal exports) the health costs of coal would be substantially higher, and therefore the cobenefits of decarbonisation substantially greater. Third, the fossil fuels alleviate poverty argument is dangerously short-sighted because it ignores the developmental (and obviously all the other) implications of climate change resulting from the continued burning of fossil fuels. According to a report produced by a Commission comprising The Lancet and the University College London Institute for Global Health, climate change is the biggest global health threat of the 21st century: vector-borne diseases will expand their reach and the indirect effects of climate change on water, food security, and extreme climatic events are likely to have the biggest effect on global health.26 Moreover, the Commission reinforced previous conclusions that climate change will disproportionately affect the worlds poor.27 Fossil fuels provide cheaper energy (in some contexts) in the short term but threaten lives and livelihoods in the longer term.

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Box 6.2: Why Supplying Coal and Gas to Developing Countries on Poverty Alleviation Grounds is Flawed
First, it is patently false for some applications. Even at current prices, renewable energy can provide cheaper household power than fossil fuels for more than 1 billion people. As discussed further in Chapter 7, solar photovoltaic power is now a cheaper energy solution for remote, off-grid areas, where the vast majority of the worlds energy poor actually lives.23 As such, allocating capital to coal and gas at the expense of distributed renewable energy solutions actually prolongs the harms suffered by the worlds most energy poor populations. Second, in those markets where fossil fuels are cheaper than renewable energy, the price differential subsists partly because the full costs of fossil fuels are not incorporated into their price. Fossil fuel prices do not incorporate local externalities (to say nothing of the externalised climate damage costs) which typically include large public health impacts from fossil fuel combustion that affect local communities where electricity is generated.24 Decarbonising electricity generation in developing countries would have considerable and immediate health co-benefits for local populations. According to one study of alternative climate policy scenarios published in the worlds preeminent international

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First, global decarbonisation policies should be designed so that developing nations are less exposed in the initial periods, consistent with their justified longer timeframes for decarbonisation. Second, the provision by developed countries of finance for zero emissions technologies and services, other financial payments and technology transfers, technical expertise and capacity-building will need to be built into global decarbonisation efforts in order to ensure they do not compromise equity and poverty alleviation objectives. In the case of low-income developing countries, such assistance can complement existing sustainable development policies, for example by financing distributed renewable energy generation systems that can assist in reducing energy poverty. The Climate and Clean Air Coalition, discussed in Chapter 5, is a good example of developed country financial assistance directed to the achievement of both socially and environmentally progressive development goals. Developed countries must also look to ways of developing a more cooperative framework for sharing the benefits of proprietary technologies, goods and services that are essential for reducing emissions. This remains a significant challenge for the international community.28 Facilitating the diffusion into developing countries of such technologies, without jeopardising private sector incentives to invest in making them in the first place, is likely to necessitate the provision of additional resources by developed countries as a component of their global decarbonisation responsibilities. Harnessing international trade and investment to promote the freer flow of goods and services that can assist in emissions reduction efforts would generally assist with this goal.29 Thirdly, through their own deployment policies, developed countries should bring about low-cost, on demand renewable energy so that decarbonisation becomes more affordable to developing countries by the time their decarbonisation timelines start to bite. Ultimately, all countries must decarbonise. If dangerous climate change is to be avoided, the delay in the phaseout timeline for major developing nations such as China must be short-lived. Over the long term, global development goals simply cannot be achieved otherwise. With developing nation emissions rapidly rising, the phase-out of fossil fuels and continued economic growth in developing nations must be achieved together. These twin objectives are recognised by the UN Development Program, the International Energy Agency and leading international development NGOs such as Oxfam.30 It is why the UNs Sustainable Energy for All initiative is focused on expanding global access to modern energy services primarily through renewable energy deployment and energy efficiency improvements31 not through ever greater amounts of cheap coal and gas from Australia.

The following chapters on Australian decarbonisation initiatives recognise the importance of international equity and poverty alleviation as part of broader strategies to assist developing countries transition away from fossil fuels (including those that we should no longer be exporting to them) and scale-up renewable energy. For example, we explain the international aid and poverty alleviation benefits of Australian measures to deploy renewable energy in Australia and overseas.

6.3.3 Australias National Interest

Up to now, we have focused on Australias responsibilities to the rest of the world, but Australia clearly also has the responsibility to serve the interests of its own citizens. Policy must, for practical if not ethical reasons, also serve the national interest.32 Preserving a safe climate is manifestly in Australias national interests. Without sufficient global action, the social, economic and environmental impacts of climate change on Australia will range from highly damaging to devastating. This sits in contrast to many mainstream, rationalist accounts of international climate policy. Such accounts typically treat climate change as a global collective action problem in which action by one country entails an internal cost to that country but confers an external benefit on all countries. The standard conclusion is that unilateral action, or leadership, is irrational because the costs to that country of such action outweigh the benefits in the absence of sufficient action by all to realise the global benefit of climate protection.33 Successive Australian governments (from both major parties) and their policy advisers have accepted this logic without reservation, albeit with two slightly different implications. Some leaders have done so to justify inaction on the basis that Australian mitigation action will impose local costs on Australia while conferring no local or global benefit in the absence of sufficient action by other key emitters.34 Others, including the current Government, have drawn on the rationalist account of climate policy to justify moderate, incremental action that accords with the perceived level of action by other key countries.35 In the calculations of the latter, the national benefit is located in the advancement of cooperative action and hence improvement in the probability of eventually sufficient action through the contribution of globally proportionate mitigation by Australia.36 Again, on this view, the costs of leadership action are assumed to outweigh the benefits. The differences in the interpretation of the rationalist account of climate policy by Australian politicians and policy makers outlined above reveal an obvious point: the national interest is not objectively determinable; it is not

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out there, awaiting discovery through the application of some rational, scientific process. Rather, it is subjective and contested; viewed differently by different people and groups and in different circumstances, and changing over time. In a practical sense, the national interest is determined ultimately by the federal Government of the day and is embodied in the decisions of the executive and the laws passed by the Parliament.37 But the judgements of politicians and political parties are, in turn, affected by many complex factors, including: their values and beliefs; their political calculations; powerful interest groups, personalities and institutions; international circumstances and events; our domestic situation (geography, economy, political system); social and ethical norms; and much more. In other words, such judgements are socially constructed. Moreover, as Eckersley argues:38 In the case of climate change, the social construction of the costs and benefits of action or inaction vary enormously between different national jurisdictions depending on different local circumstances, different cultures of risk assessment, what kind of discount rate is adopted, what kinds of benefits and risks are costed or ignored and whether risks are appraised in the context of economic, security, environmental or justice frames. These assessments can also vary markedly over time in the same jurisdictions due to contingent events (extreme weather), or depending on which parties are in government. In Australia, the calculation and expression of the costs and benefits of climate action has been framed overwhelmingly by the fossil fuel industry.39 The influence of these industries on Australian political leadership has contributed to a myopic conception of the costs and benefits of action one in which small costs are exaggerated into large costs, costs to a relatively small few are extrapolated to national costs (to a far greater extent than is justified), and in which benefits of action are construed extremely narrowly, if at all.40 It is also typically the case that the benefits and costs of business as usual are not articulated, even though doing nothing is a choice that also entails costs and benefits. We firmly believe that Australian leadership on decarbonisation is in Australias national interest. In each of the following Chapters, we set out a number of arguments that explain some of the key economic, social and environmental benefits to Australia of the actions we propose, while recognising that they will also impose costs. In our view, these arguments suggest that the specific policies we advocate are not only economically affordable, but would also serve the national interest well.

Our purpose in this regard is to articulate some of the most significant benefits of leadership action with a view to prompting deeper discussion about the choices Australia faces. Quantifying every cost and benefit is beyond the scope of this paper. Aside from lacking the resources to undertake such an exercise (it would likely costs hundreds of thousands of dollars to commission economic consultants to do this modelling in a way that enjoys mainstream credibility), we have avoided attempts at crude quantification because many of the costs and benefits that we highlight including those that matter most are either unquantifiable in financial terms, or, to the extent that methods exist to quantify such costs and benefits, those methods are themselves open to contestation on normative grounds (for example, the determination of the discount rate to apply to valuations of future benefits; the means for ascribing value to the preservation of an animal species; and the dollar value of an Australians sense that the world is a safe place to raise children).41 This is not to suggest that attempts at modelling are unhelpful, rather it is to recognise that quantifications can only ever be partial, imperfect and contestable part of the conversation, not the answer to all our questions. Ultimately, whether cooperative decarbonisation is in the national interest will depend on what we value most, not how we quantify every cost and benefit.

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6.4 From Responsibility to Action

How should Australia go about fulfilling its great responsibilities to lead the world to zero carbon prosperity? Put simply, it should start with its own decarbonisation and then leverage its domestic policies and measures on the international stage, seeking to draw other countries into cooperative arrangements that accelerate global decarbonisation efforts. This is not pie-in-the-sky: showing exactly how this can be done is the raison dtre of the Zero Carbon Australia Project. The Zero Carbon Australia (ZCA) series is demonstrating that the task of 100% decarbonisation is technically achievable within a decade using existing technologies and processes, and that the long-term cost (ignoring climate-related costs and benefits) is comparable to that of business-as-usual. The 2010 Stationary Energy Plan was the first ZCA Plan released, in recognition of the importance of Australias coal-dominated electricity grid, and other forms of stationary energy, in our domestic emissions profile. The Plan examines in significant detail a pathway towards a zero emissions energy system where: The coal and gas-fired generators of today are replaced predominantly with wind energy and concentrated solar thermal with energy storage, with hydroelectric and biomass backup. This technology mix is favoured because it is available off-the-shelf, it allows the integration of the variability of wind with the dispatchas-needed power of solar thermal. It will also allow Australia to develop an advantage in solar thermal one of the most flexible renewable energy technologies, with the capacity to provide solar-powered baseload and thereby displace coal. Nationwide energy demand is reduced through energy efficiency, but total electricity demand is assumed to rise due to electrification of transport and heating, replacing oil and gas use that is currently not related to electricity. The transition time is 10 years, requiring a total investment of AU$370 billion, or around 3.0% of GDP per year. The required investment, timeline, materials and workforce requirements are examined in detail, and found to be within Australias capacity to meet. Due to savings on fuel costs alone (ignoring other factors, such as health improvements), with a social discount rate of 1.4% there is no difference between the net present value of the Stationary Energy Plan and the BusinessAs-Usual pathway. Emissions in the stationary energy sector fall from 417 million tonnes of CO2-e today to zero. Large-scale renewable energy deployment and integration serves the secondary purpose of substantially reducing zero carbon technology costs for both Australia and the rest of the world (explored further in Chapter 7 on Australias research, development and deployment

strategy) and of establishing Australia as a leader in zero carbon energy system design, management and finance (and, to a lesser extent, manufacturing). The technology mix in the Stationary Energy Plan has been modelled using years of real solar insolation and wind speed data from sites around Australia. The system is able to successfully meet 100% of Australias electricity needs throughout all seasons of the year. Following the Stationary Energy Plan, the ZCA Project has turned its attention to releasing Plans for Buildings, Transport and Land-Use. Future plans will cover Industrial Processes and Replacing Fossil Fuel Export Income. The critical benefit of Australias decarbonisation effort lies in its potential to reduce global greenhouse gas emissions and steer the world onto a zero carbon trajectory. By phasing out the emissions from those processes within its sphere of influence, Australias efforts would have a direct impact on global emissions. But the greatest potential benefit of Australias decarbonisation would be the changes it would induce from others. As Professor Garnaut put it: Each countrys evaluation of whether some mitigation action of its own is justified depends on its assessment of the interaction between its own decisions and those of others.42 By enacting policies that enable the widespread deployment of CST and other technologies, we would enable companies to achieve economies of scale and spark a cycle of innovation and cost reductions similar to Germanys PV revolution, making renewable energy more affordable to people everywhere. By raising building and product efficiency standards, we stimulate the design of highly efficient products. By halting the expansion of our coal and gas exports and investing in renewable energy development, we influence global energy markets and accelerate the transition to renewable energy across the world. The technologies, products, processes, services, skills, knowledge and experience developed by Australian companies, researchers and governments in the process of decarbonising Australias $1.5 trillion economy will be extremely valuable in a world crying out for zero carbon solutions. Australia should aim to become the worlds goto country for zero-carbon products, zero-carbon services, zero-carbon finance and zero-carbon systems planning. The global benefit, in terms of facilitating emissions reductions overseas, of Australias zero carbon ingenuity and experience would be considerable. And the benefit to Australia of capturing what HSBC is forecasting to be a multi-trillion dollar market by 2020 would be enormous.43

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In the following two chapters, we illustrate the immense potential for Australian leadership by showing how the decarbonisation of Australias domestic and export energy industries can steer the world away from fossil fuels and towards renewable energy, while alleviating poverty and serving Australias national interest. We focus on energy for two reasons. The first reason is that energy is the area in which Australia leadership can make the greatest global difference, as we explain above in our discussion of Australias special capabilities in regard to climate solutions. The second is that it allows us to draw on the work done in the Zero Carbon Australia Stationary Energy Plan to demonstrate the affordability and technical viability of powering the Australian economy with 100% renewable energy.

References
1. See, e.g., James Garvey, The Ethics of Climate Change: Right and Wrong in a Warming World (2008) p 114-118; Mlada Bukovansky et al., Special Responsibilities: Global Problems and American Power (2012) p 229-236; WBGU German Advisory Council on Climate Change, Solving the Climate Dilemma: The Budget Approach (2009). 2. Cf Garvey, Ethics of Climate Change (2008), p 114-118; Bukovansky et al. (2012), p 229-236; Peter Singer, One World; The Ethics of Globalisation (2002) 30-55. 3. 4. 5. See, e.g., Bukovansky et al. (2012), p 231-232. See, e.g., Garvey, Ethics of Climate Change (2008), p 114-118. Stephan Lewandowsky, History Shows Australia is No Pissant when it Comes to Emissions, The Conversation (1 June 2011) http://theconversation.edu. au/history-shows-australia-is-no-pissant-when-it-comes-to-emissions-1589, based on data from the Carbon Dioxide International Analysis Centre, http:// cdiac.ornl.gov/. 6. World Bank, World Development Indicators Database: Gross national income per capita 2010, Atlas method and PPP (1 July 2011) http://siteresources. worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf and Gross Domestic Product 2011 (9 July 2012) http://databank.worldbank.org/databank/ download/GDP.pdf. 7. 8. WBGU (2009). See, e.g., Timothy L H McCormack, Some Australian Efforts to Promote Chemical Weapons Non-Proliferation and Disarmament, Australian Yearbook of International Law (1992) 14, p 157. 9. See, e.g., ibid. Background Paper, 2 May 1991). 11. Ibid, p 21. 12. Ibid. 13. Frank Frost, The Peace Process in Cambodia: The First Stage (Parliamentary Research Service, Background Paper, 24 June 1992) p 19. 14. Gareth Evans Australias Foreign Relations in the World of the 1990s (Speech to the National Press Club following the launch of Evans and Grant, Australias Foreign Relations: in the World of the 1990s, Canberra, 4 November 1991) 5-6, http://www.gevans.org/speeches/old/1991/041191_ fm_australiasforeignrelations.pdf. 15. Alexander Downer Australias Commitment to the Pacific (Speech for the Biennial Sir Arthur Tange Lecture on Australian Diplomacy, Canberra, 8 August 2007) http://www.foreignminister.gov.au/speeches/2007/070808_tange. html. 16. See, e.g., McCormack (1992); Frost (1992); Interview: Bob Hawke on Conserving Antarctica, available on YouTube (uploaded 19 February 2012) www.youtube.com/watch?v=iH9l7VmSarU. 17. See, e.g., McCormack (1992); Frost (1992). 18. See generally United Nations Development Program, Climate Change, http://www.undp.org/content/undp/en/home/ourwork/ environmentandenergy/strategic_themes/climate_change.html; Oxfam, Climate Change, https://www.oxfam.org.au/explore/climate-change/. 19. UN Millennium Development Goals, Fact Sheet (2010) http://www.un.org/ millenniumgoals/pdf/MDG_FS_1_EN.pdf. 20. Ibid. 21. Energy Poverty, International Energy Agency, http://www.iea.org/topics/ energypoverty/. 22. Ibid. 23. Ibid. 24. On externalities in electricity generation generally and coal-fired power 10. See Frank Frost, The Cambodia Conflict (Parliamentary Research Service,

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specifically, see Australian Academy of Technological Sciences and Engineering, The Hidden Costs of Electricity: Externalities of Power Generation in Australia (March 2009); David Shearman and Linda Selvey, Something In the Air: Time for Independent Testing in Coal Areas, The Conversation (9 March 2012); Doctors for the Environment Australia, DEA Position Paper on the Health Impacts of Coal (14 February 2012) http://dea.org.au/images/ general/Briefing_paper_on_coal_2011.pdf. 25. Anil Markandya et al., Public Health Benefits of Strategies to Reduce Greenhouse-Gas Emissions: Low-Carbon Electricity Generation, The Lancet (12 December 2009) 374(9706), p 2006. 26. Anthony Costello et al., Lancet and University College London Institute for Global Health Commission, Managing the Health Effects of Climate Change,

will of the people. On this view, the national interest is devoid of substance; it is merely a product of a lawful and rightful process. 38. Eckersley, Does Leadership Make a Difference in International Climate Politics?. 39. Guy Pearse, High & Dry (2007); Clive Hamilton, Scorcher: The Dirty Politics of Climate Change (2007); Guy Pearse, Quarry Vision, Quarterly Essay 33 (2009); Ross Garnaut, Launch of the Garnaut Climate Change Review 2011 Final Report, Address to National Press Club (31 May 2011) News Centre Transcript, http://www.garnautreview.org.au/update-2011/events-speeches/ transcript-final-report-launch.pdf. 40. Pearse, Quarry Vision. 41. On discount rates, see W Beckerman and Cameron Hepburn, Ethics of the Discount Rate in the Stern Review on the Economics of Climate Change, World Economics (2007) 8(1), p 187210; Garnaut Review 2008, Ch 1.7. 42. Garnaut Review 2008 Ch 1.5. 43. Catherine Airlie, HSBC Says Low-Carbon Market Will Triple to $2.2 Trillion by 2020, Bloomberg (6 September 2012) http://www.bloomberg.com/ news/2010-09-06/hsbc-sees-market-for-low-carbon-energy-tripling-to-2-2trillion-by-2020.html.

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The Lancet, 73 (16 May 2009) p 1693. 27. Ibid p 1694-1696. 28. See, e.g., Letha Tawney and Lutz Weischer, World Resources Institute, From Copenhagen to Cancun: Technology Transfer (19 November 2010) http:// www.wri.org/stories/2010/11/copenhagen-cancun-technology-transfer. 29. WTO negotiations on the reduction or elimination of tariff and non-tariff barriers to environmental goods and services are currently a subject of negotiations within the longstanding Doha Round launched in 2001: WTO Ministerial Conference, Fourth Session, Doha, 914 November 2001, WT/ MIN(01)/DEC/W/1, Ministerial Declaration (adopted 14 November 2001) at para 31.3. 30. UNDP, Climate Change; Oxfam, Climate Change; IEA, Energy Poverty. 31. See The Secretary Generals High-Level Group on Sustainable Energy for All, Sustainable Energy for All: A Global Action Agenda (April 2012), available from http://www.sustainableenergyforall.org/#. 32. Cf Bukovansky et al. (2012) p 231-232. 33. See, e.g., Ross Garnaut, The Garnaut Climate Change Review (2008) Ch 12; Peter Cramton and Steven Stoft, International Climate Games: From Caps to Cooperation, Global Energy Policy Research Paper No. 10-07 (20 August 2010). See also the discussion of this mentality in Robyn Eckersley, Does Leadership Make a Difference in International Climate Politics?, Paper presented at the International Studies Association Annual Meeting, San Diego, USA, 1-4 April 2012 (1 April 2012) p 9-11. 34. See, e.g., Tony Abbott quoted in James Massola, Coalition, Greens attack Durban climate pact , The Australian (12 December 2011) http://www. theaustralian.com.au/national-affairs/climate/coalition-greens-attack-durbanclimate-pact/story-e6frg6xf-1226219726745; John Howard, Transcript of the Prime Minister, the Hon John Howard MP, Address to Queensland Media Club, Sofitel Hotel, Brisbane (23 April 2007) http://parlinfo.aph.gov. au/parlInfo/search/display/display.w3p;query=Source%3A%22PRIME%20 MINISTER%22%20Speech_Phrase%3A%22yes%22%20MajorSubject_ Phrase%3A%22economic%20growth%22;rec=4; John Howard quoted in Graham Lloyd, IPCCs folly writ large: John Howard, The Australian (24 November 2011) http://www.theaustralian.com.au/national-affairs/carbontax/ipccs-folly-writ-large-howard/story-fn99tjf2-1226204100938. 35. See, e.g., Wayne Swan, The Role of Government in a Changing Economy, Address to the Economic and Social Outlook Conference, Melbourne (30 June 2011) http://www.treasurer.gov.au/DisplayDocs. aspx?doc=speeches/2011/021.htm&pageID=005&min=wms&Year=&DocTy pe; Garnaut Review 2008. 36. See Garnaut Review 2008 Ch 12 for the best description of this logic. http:// www.garnautreview.org.au/chp12.htm. 37. This is distinct from the positivist conception of the national interest, in which the decisions of the executive and the laws passed by the Parliament can be seen as necessarily in the national interest because they originate from our elected representatives and are therefore ultimately the expression of the

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Part 7 Renewable Energy: Australias Contribution

Contents
7.1 7.2 Introduction  54 The Problem: Severe Underinvestment in Zero Carbon Innovation  55 7.2.1 The Case for Public Investment in Zero Carbon Deployment 56 7.2.2 The Case for Public Investment in Renewable Energy Research and Development 56 What Should Australia Do and What Effect Would it Have? 58 7.3.1 Unilateral Action: Australia Leading by Example 58 7.3.2 Coordinating with Like-Minded Countries 63 The National Interest in Renewable Technology Deployment and Development 7.4.1 Sizing the Zero Carbon Economy 7.4.2 Australian Opportunities in Clean Tech Markets 66 66 68 71

7.3

7.4

References 

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7.1 Introduction
Initiatives to achieve price parity between renewable energy and fossil fuels are often heralded in lofty terms: the US roadmap for reaching low-cost large-scale solar energy by 2020, for example, was christened the Sunshot initiative; while Bloomberg New Energy Finance posed the shorter-term Golden Goal of competitive small-scale solar PV. This high status is well deserved: cheap renewable energy will solve some of the most challenging problems facing humankind this century from climate change, to oil scarcity, to energy poverty and allow us to build a global economy upon foundations that are as reliable as the rising sun.
Cheap renewable energy will be achieved but, on current deployment trajectories, it will come far too late to avert catastrophic climate change. The rapid price reductions achieved for solar PV and wind turbines over the past decade are cause for significant optimism, but these two technologies alone cannot be expected to meet 100% of our energy needs.

To complete the transition, we need zero carbon energy technologies that can provide energy storage and flexible, dispatchable-on-demand power to firm the variable output of wind and PV. Key commercial technologies that are ready for deployment include batteries and concentrated solar thermal (CST). Yet, in early 2012, the IEA warned that global innovation programs for most of these emerging technologies are falling off track largely due to shortfalls in commercial-scale demonstration and deployment. The recent successes of wind and PV confirm what is required to accelerate the arrival of these commercially available but less mature technologies: substantial and stable investment in research, development and demonstration (RD&D), and particularly deployment (see Box 7.1 for an explanation of these terms). For Australia, countries like Germany and Denmark can serve as models of how much one nation can contribute. This Chapter examines how Australia can work to accelerate the maturation of renewable energy technologies and their arrival at price parity with fossil fuels. It argues that Australia should: Increase investment in commercial deployment to at least $15 billion per year in line with baseline fair share requirements specified by IEA analysis, rising

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Box 7.1: The Innovation Chain: A Brief Overview

This Chapter makes reference to a number of stages of the innovation chain, with which readers may not be familiar. These include: R&D, or research and development. This denotes research, from basic and prototype development, which provide advances that can enhance the performance of existing products or be used in entirely new products. Demonstration. This refers to the testing of prototyped technologies in-the-field, at a scale or level of performance similar to that required to effectively participate in markets for example, a multi-megawatt demonstration of a novel wave power project. While pilot demonstrations tend to prove the functionality of the technology at scale, commercial-scale demonstrations attempt to prove the capacity to provide a return. Both provide essential in-the-field learning that feeds back to R&D and forward to indicate prospects for deployment. RD&D is research, development and demonstration, a term that comprises the stages of the innovation chain that pertain to more immature technologies. It is split into one of its constituent terms, R&D or demonstration, wherever a distinction is necessary. Deployment is commercial, to-scale implementation of relatively mature projects in the field. Early deployment, via a range of market mechanisms, is crucial for driving technology cost reductions such as increased

manufacturing scale and standardisation (each of which provides its own innovation opportunities), but requires substantial public support. Effective deployment policies have been crucial for driving the rapid wind and solar price reductions observed over the past two decades. The stages of innovation listed above are inter-linked and mutually supportive. For example, accelerating PV deployment may stimulate R&D into strategies for improving PV value chain efficiency, reducing the costs of further deployment. Supporting commercial demonstrations provides a real-world laboratory to enhance basic R&D, while also building investor confidence in the technology at the deployment stage. The vocal minority that promotes an R&D only solution to zero carbon innovation (e.g. Bjorn Lomborg1) fundamentally misunderstands the integrated nature of the various stages of the innovation chain: the importance of deployment for driving innovation around manufacturing efficiency, financing, product development and a range of other market factors; and, as this chapter discusses, the need to provide zero carbon innovation investors confidence that there exists a market for zero carbon products. This is a particularly important point for Australia, given that deployment is its weakest link in zero carbon technology innovation.

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to $37 billion per year in line with the ZCA Stationary Energy Plan; increase annual RD&D expenditure in the order of $3 billion per year, in line with fair share requirements identified by the IEA and Professor Ross Garnaut; introduce comprehensive innovation support measures along the innovation chain, with a particular focus on accelerating deployment of technologies that are less mature but have high promise (with CST highlighted as the primary example); coordinate efforts with other like minded nations and with a wide range of non-state actors, establishing shared roadmaps for technology advancement; contribute to the design of programs to build RD&D and deployment capacity in developing nations; and seek to develop its natural advantages in renewable energy resources to become a zero carbon technology superpower, especially in areas Australia can strongly compete from finance to software, manufacturing, project development and operation & maintenance.

7.2 The Problem: Severe Underinvestment in Zero Carbon Innovation

Despite the importance of innovation for long-term economic prosperity, a cocktail of market failures cause private companies to systematically underinvest in zero carbon deployment and RD&D. Figure 7.1 from Ernst & Young outlines the chain of activities that make up the innovation process, extending from early research, through demonstration and commercialisation, to deployment, and finally to maturity. Capital availability declines as innovation projects proceed into development, demonstration and commercialisation, yet the need for capital progressively increases. Many technologies that hold significant promise become marooned by capital shortfalls at the prototype, pilot or early commercial phases in what has become known as the innovation Valley of Death. The Valley of Death is especially wide for zero carbon energy technologies due to the large amounts of capital needed to meaningfully demonstrate and deploy them. Large commercial CST projects with storage, for example, are at the top of their technology cost-curves and will typically require investment running over a billion dollars. A persistent challenge for nations interested in achieving economically efficient levels of innovation is that what are in fact judicious long-term investments (see Figure 7.2) are derided with the politically charged term subsidies. Often these complaints come from the old guard of fossil fuel industries, ignoring the fact that oil, gas and coal

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Figure 7.1

The wide valley of death for cleantech2

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Figure 7.2

Stylized return on investment in renewable energy3

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The market barriers to large-scale zero carbon energy demonstration and deployment particularly for emerging forms of generation like CST are considerable. While access to renewable resources is effectively infinite, the cost of producing energy from renewable technologies is currently more than the fossil alternatives due to regulatory barriers, higher risk premiums, higher up-front costs and often higher market costs overall. While carbon pricing can in theory bridge the gap by making fossil fuels more expensive, carbon pricing schemes in all major jurisdictions are currently far too weak, yielding carbon prices too low and unpredictable to properly incentivise renewable energy investments a reality that is unlikely to change in the near future. Policies like feed-in tariffs (explored further below) are needed to level the playing field and accelerate deployment. The purpose of the IEAs recommended deployment is both to achieve emissions reductions now, and achieve cost reductions to make future deployment and emissions reductions cheaper. The challenge is to invest sufficiently in deployment to cut emissions today, while aligning these investments with a longer-term innovation strategy. What this means is that choosing least-cost zero carbon energy deployment today (as seen with Australias focus on wind energy) will not result in least-cost deployment in the longterm.

have historically received and continue to receive subsidies in vast excess of those granted to renewable energy. Indeed, this long history of public support has helped them become the cheapest forms of energy today; a process that now needs to be repeated for zero carbon technologies. Here, we examine the origin and scale of market failures in zero carbon technology innovation to explain the dimensions of the shortfalls we face.

7.2.2 The Case for Public Investment in Renewable Energy Research and Development
There are two causes of private sector underinvestment in zero carbon research and development (just R&D). First, zero carbon R&D suffers from the usual market failures afflicting all R&D: the non-excludability of research (or its rapid leakage into other companies and countries); the risks involved in blue sky research (basic research that lacks any immediate commercial applications); and the short-termism inherent in private sector value calculations. In other words, while R&D may create enormous society-wide economic value, it is often hard for a private company to translate this into its own commercial success. Secondly, zero carbon technology R&D in particular is affected by the failure of markets to adequately price carbon emissions and other public harms caused by the fossil fuel energy system.18 If these harms were properly priced at a value that reflected the true costs to society of climate damage, there would be a greater incentive for private companies to perform zero carbon R&D. In the words of the OECD Environment Directorate, zero carbon technology R&D is twice a public good and deserves substantial public support as a result.19 Because private companies chronically underinvest in R&D that is, they spend less on R&D than is justified by

7.2.1 The Case for Public Investment in Zero Carbon Deployment

According to the IEA, to achieve even the risky 2C pathway, an additional investment of around US$36.5 trillion in energy infrastructure is required globally from now to 2050 an average of US$950 billion per year (the IEA recommends starting slowly in the first decade and ramping up from there).4 As large as this figure sounds, it is only 35% more investment than required to meet growing demand under the business-as-usual, 6C warming pathway.5 The IEAs projection that fossil fuel subsidies will reach US$660 billion per year by 2020 shows that much of the money is there, it is just in the wrong business.6 In fact, subsidies promoting fossil fuel use dwarf those for renewable energy. In the US, oil industry subsidies from 1950 to 2010 totalled US$369 billion, around 19 times the US$20 billion allotted for solar power.7 Just as fossil fuels have enjoyed high levels of subsidies throughout their history, so too will large scale renewable electricity generators require significant deployment support if the IEAs 2C pathway is to be achieved.

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Box 7.2: Deployment Works

Photovoltaics Even the relatively small public subsidies granted to solar photovoltaics (PV) have led to massive price reductions over the past decade. The price tag of installing enough PV to supply 11% of the worlds energy (which the IEA specifies as PVs role in cutting global emissions by 50%) has declined from US$53 trillion in 1982 to around US$3.5 trillion today a fall of US$50 trillion, or almost 95%, over 30 years.8 PV has received unprecedented deployment support in economies such as Germany over the past decade, triggering explosive growth in installed capacity. From 2000 to 2011, annual growth in the yearly global installation rate was 40%. In 2011, the total amount of global PV capacity installed was 27GW, an astonishing 60% growth on 2010 levels. Prices have responded in tandem. Full PV system prices have fallen as much as 75% in some countries over the past 3 years,9 and silicon wafer (the most expensive component used to build solar modules) prices have fallen by 70% in just the past year.10 At the industrial scale, levelised solar PV prices are already as low as 15c/kWh in sunny areas,11 competitive with grid electricity in many countries around the world. As shown in Figure 7.3, price declines per watt of PV generation (along the vertical axis) closely track installation volume in MW (along the horizontal axis). Given the increase in deployment has been driven by policy (i.e. this is not a case of price reductions driving further deployment), the implication is clear: to achieve grid parity, install more PV. Wind power A general trend of increased wind power capital costs in the 2000s has been used to counter the idea that deployment helps bring down production prices, but recent University of California Berkeley analysis shows this argument to be spurious. Capital costs have generally increased since 2000, but improvements in wind turbine project performance have accompanied and outpaced these cost increases. The overall cost of wind-generated energy per kWh has decreased by 17% to 31% since 2002, driven by increased capacity factors, reduced operation and maintenance costs, and improved financing.13 The estimated price of wind as of early 2012 was US$6085 per MWh (at average wind speeds from 8 m/s to 6 m/s respectively). Similar pricing has come to Australia, with a recent Snowtown project achieving AU$80/ per MWh.14 With average new coal power plants pricing at US$60-80 per MWh, wind energy is now approaching costcompetitiveness without subsidies.15,16 A further reduction of only 10-20% over the next decade will enable wind to unseat fossil fuels in most locations across the world. The increase in wind turbine capacity factors has particular promise for increasing the number of sites rated as possessing good wind resources and for reducing total wind power variability. The land area of the US that can support wind projects with a capacity factor above 30% has doubled, while land area supporting very high capacity factors of above 40% has increased by up to 1400% (due to new wind turbine designs). This bodes well for the continued expansion of wind farms into previously marginal locations, and the goal of high penetration of wind into grids across the world.

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Side Analysis: Impact of Improvements in O&M, Financing, and Availability (without PTC/MACRS)

over ten years from 2002-03, due to capital cost, capacity Core Assumptions Side Analysis Assumptions 12 17 Cost Curve of PV modules as a function of deployment factor O&M, availability financing improvements only varies capital cost and capacity factor also varies O&M,and availability, and financing
Figure 7.3
$120

Assumed improvements in O&M costs, financing rates, and availability lead to substantial additional estimated LCOE reductions from 2002-2003 to 2012-2013 in Figure 7.4 comparison to core analysis that Estimated only varies capital cost and factor reductions in LCOE of capacity wind power in the USA

$140

LevelizedCostofEnergy($/MWh) NoIncentives

LevelizedCostofEnergy($/MWh) NoIncentives

$100
$80

20%CostReduction 6m/s

$120

$100
$80 $60 $40 $20

31%CostReduction 6m/s

7m/s

7m/s 8m/s 17%CostReduction

$60 $40 $20

8m/s 3%CostReduction

$0
200203 StandardTechnology Current,201213 TechnologyChoice

$0
200203 StandardTechnology Current,201213 TechnologyChoice

Note: Technology Choice assumes that IEC Class III machines are only available for sites up to 7.5 m/s average wind speed at hub height (sea level air density) 35

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its economic value they leave a significant amount of potential wealth untapped. As a result, public investment in R&D, for example, tends to provide exceptionally high rates of return, with estimates ranging from 30% to up to 160% and beyond, compared to attractive private rates of return in the general economy of 8-15%.20,21,22 In an ideal market that produces the greatest wealth over time, investment in R&D funding would be increased until the marginal return on investment fell to the average market rate. Estimates of optimal global clean energy R&D investment range from US$50 billion23 to US$100 billion24 per annum, or 3-7 times current global investment. An increase of this size may sound far-fetched, but it is around the proportion of GDP expended on energy R&D in 1980. Despite the mounting of our energy challenges over the past two decades, investments in R&D have fallen 30-50% below 1980 levels and the share of energy R&D expenditure in total R&D has declined by around two thirds. It is remarkable that in a US$70 trillion dollar global economy facing severe energy and climate crises, only US$15 billion 0.02%, or two dollars in every US$10,000 of global GDP is invested globally in clean energy R&D each year.25 To put that in perspective, this is less than 1% of annual global military expenditures.26

7.3.1 Unilateral Action: Australia Leading by Example

This section sets out the domestic measures Australia should take to invest in zero carbon RD&D and especially deployment. These measures are grouped under four categories of increasing specificity, beginning with broad investment targets, moving to general innovation policy design, through to identifying national technology priorities, and finally examining some of these priorities in closer detail. Investment targets First and foremost, Australia should commit to undertake a significant share of the global investment considered optimal for achieving climate stabilisation goals. Currently projected investment under Australias Clean Energy Future package represents an improvement over previous years, but nevertheless remains in serious shortfall. The Clean Energy Future package provides AU$3.4 billion in R&D support over the five years, or AU$680 million per year.27 This represents only 23% of the R&D investment recommended by the IEA and the Australian Government-commissioned Garnaut Review on the economics of climate change.28 The recommended AU$3 billion per annum should be regarded as a minimum target for dedicated zero carbon energy technology RD&D. For deployment, the Clean Energy Future package and other Government policies, such as the 2020 Renewable Energy Target of 20%, are expected to deliver a total of AU$20 billion in deployment of clean energy technology to 2020.29 This comes to around AU$2.5 billion per year, or around 0.16% of GDP, and the Governments definition of clean allows this funding to be drawn into gas-fired power projects.30 This compares to the minimum of 1.2% recommended by the IEA (or around AU$15 billion per annum). Leveraging a combined public-private investment of at least AU$18 billion (AU$3 billion in RD&D and AU$15 billion in deployment, in line with fair share IEA minimums) should be an immediate baseline goal. This should rise to an average of as much as $40 billion per annum, predominantly directed towards large-scale deployment of both emerging and mature zero carbon energy technologies, if the Zero Carbon Australia (ZCA) 10 year Stationary Energy Plan is implemented. Note that the ZCA Stationary Energy Plan as originally conceived includes a cost-premium for extensive innovation arising from early deployment of CST it achieves both 100% decarbonisation and the innovation goals outlined in this chapter.

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7.3 What Should Australia Do and What Effect would it Have?

The deficit in zero carbon innovation is a global problem, and it needs a global scale solution to match. Accordingly, alongside its public announcement of the fossil fuel moratorium proposed in Chapter 8, the Australian Prime Minister should announce Australias intention to pursue a domestic and international program of unprecedented renewable energy deployment and RD&D to provide replacements for fossil fuels in energy generation, industrial processes and transport. This ambitious declaration should be accompanied by a detailed set of commitments that Australia will undertake to kickstart deployment and research programs domestically and enhance collaboration internationally. The suite of unilateral measures that Australia should take to advance innovation is set out below, along with an explanation of the catalytic effect these efforts would have on renewable energy globally. We then show how Australias leadership should be leveraged to foster widespread, cooperative international engagement in innovation efforts, multiplying the benefits of Australias domestic action.

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Comprehensive renewable energy innovation policy Size matters, but there is more to effective innovation than the volume of investment. Australian zero carbon innovation is often heavily critiqued. Criticism typically focuses on the difficulty of attracting meaningful investment in technology commercialisation within Australia. This is partly blamed on our small market size, but more accurately is due to the ad hoc and piecemeal nature of Australian innovation support programs in essence, their inability to support a pipeline of projects. The Australian Governments Solar Flagships program is a case in point: its goal of building the single largest solar power station in the world31 was more about generating political fanfare than providing the long, stable pipeline of projects that would help establish an Australian solar industry. The on-and-off nature of solar PV feed-in tariff policies across most Australian states has been similarly counterproductive, generating brief booms and then crippling the emerging industry by removing all support. The most stable policy has been the 2020 Renewable Energy Target (RET) of 20% but even the RET only supports lowest-cost technologies such as wind eliminating the potential for the scheme to drive innovation.

Driving emerging renewable energy technologies towards commercial competitiveness, and through the Valley of Death, requires a comprehensive policy program that meets the needs of innovators along the breadth of the innovation activity chain from early R&D, through prototyping and piloting, commercial scale demonstration, and the early and late stages of deployment (see Figure 7.5). Each stage has policies that suit the barriers particular to it: R&D benefits from tax credits, direct public investment into blue-sky research and investment in national laboratories and networks. Successful prototypes and pilot demonstrations require grant funding and incentives to attract venture capital. At the commercial demonstration stage, support can be structured in a way that recognises some return will be generated, with loans and tax breaks two of the preferred options. At the deployment stage, stable performance subsidies and energy portfolio standards can create the incentives, and the confidence in the future of the market, needed to attract large levels of private investment. The number of policy options is immense and an exhaustive treatment is beyond the scope of this report. Ernst & Young point out two policies as playing a particularly important role in addressing Australias weaknesses in commercialisation and deployment: loan guarantees to overcome funding risk and feed-in tariffs for revenue risk.32 With these risks addressed, attracting up-front equity becomes a much more likely prospect for emerging clean tech companies.

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In short, Australia has a dismal track record of innovating through deployment. Where Australia does deploy technologies, it tends to focus on safe, mature technologies such as wind; and where Australia does deploy immature technologies, it has lacked the long-term The following diagram illustrates the role that these four mechanisms can take in supporting commitment that would produce a stable industry.
the availability of capital, ahead of the RET.

Figure 7.5

Policies for navigating the valley of death

Figure 4: Scope of government action to support emerging cleantech investment

How these mechanisms are designed and maintained to deliver breakthrough technologies within host industries, and improved policy certainty for investors, needs careful consideration. Economic analysis is needed to determine the optimal level for grants, subsidies, loan guarantees and other proposed mechanisms, recognising the costs involved.

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National technology priorities Each nation, according to its resources, expertise and wider policy goals, has a set of more specific innovation advantages and interests around which its support measures should be focused. This is partly of necessity: very few nations, if any, have the economic resources to pursue a deep innovation program for every promising zero carbon technology. Nations should therefore direct a substantial share of available resources towards a set of national technology priorities.

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Australias RD&D program should prioritise technologies according to the three policy imperatives outlined in Chapter 6: decarbonisation; poverty alleviation; and Australian prosperity. 1. Renewable energy technologies that can provide flexible, dispatchable electricity and therefore replace

coal-fired generation, the most important source of Australias domestic and export emissions. These include but are not limited to CST and battery technologies; 2. Technologies that can reduce global energy poverty, especially for the 1.3 billion people that currently lack access to electricity. These include solar PV, batteries, bioenergy systems and remote grid servicing strategies; and 3. Technologies, applications and services where Australia can develop world-leading expertise and capture its share of zero carbon markets. Broadly these include the above two areas, with a focus on intellectual property, project management, finance and other services expertise, along with some manufacturing. Opportunities for technology applications of high value to Australia include renewable energy for mining, remote settings and peak demand management.

Box 7.3: Feed-in tariffs

Feed-in tariffs have the best track record of success in bringing price reductions internationally, and are the preferred deployment subsidy by clean tech companies and investors.34 Feed in tariffs have delivered the vast majority of wind energy, and essentially all solar PV energy, in the EU (see Figure 7.6). A feed-in tariff is, at its most basic level, a guaranteed payment to a renewable energy generator per unit of electricity supplied to the grid. Typically, feed-in tariff schemes are supported by imposing statutory requirements on electricity retailers to purchase electricity in priority to other supply sources and at the legislated rate, with the additional costs being passed through to electricity consumers. Advantages of feed-in tariffs include that: Differential tariffs can be applied to different technologies, or the same technologies in different applications and different project sizes. For example, solar PV for mining would attract a different rate to solar PV for residential rooftops, and different again to industrial-scale installations. This differentiation allows innovation across the desired range of possible technologies/applications, rather than only supporting the uptake of the cheapest technology; Feed-in tariffs are clearly defined, transparent payments that are guaranteed well into the future. They are therefore able to support renewable energy industry growth over the long-term. In contrast to schemes such as Solar Flagships, which provide a one-off grant payment to successful tenderers (following what is usually an opaque and lengthy tendering process) that creates perverse incentives for applicants to over-promise, feed-in tariffs are a market-based

mechanism that pays on delivery of energy;35 Premium model feed-in tariffs can promote market engagement by paying only a premium on top of the electricity market rate. This encourages renewable energy generators to participate in electricity markets and produce electricity when it is most valuable (i.e. peak times), while enhancing system-wide learning about integrating zero carbon energy with existing energy markets. Feed-in tariffs provide for predictable reduction, or regression, of support over time, including through methods such as linking regression to specific installation targets. This allows the cost of the policy to be controlled and incentivises technology improvements without sacrificing investor certainty. Introducing stable, long-term feed-in tariffs for large-scale demonstration and deployment should be a top priority for any Australian Government interested in driving renewable energy technologies, mature and immature alike, towards greater market competitiveness.
Figure 7.6

Installed renewable energy capacity supported by feed-in instruments in EU-27 countries36

90 80 70 GWCapacity 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 Windpower Feedinwindpower SolarPVpower FeedinsolarPVpower

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These technologies and applications span the gamut of the innovation chain: from R&D (battery technologies, renewable energy integration, new heat carrier materials for CST), to demonstration (advanced grid technologies for peak demand management, novel remote renewables systems), to deployment (power tower CST designs, wind turbines, solar for peak energy control, renewables for mining). This emphasises the need for comprehensive innovation support along the chain. Some of these technology opportunities are explored further below, including: Solar thermal development; Renewable-powered mining and resource industries; Remote community microgrids; Addressing peak power demand through distributed renewables and energy efficiency; and Technologies and services for integrating renewables into the electricity grid. Example technologies and applications that Australia should prioritise Concentrated solar thermal The unique characteristics of CST make it one of the most promising technologies in the innovation pipeline: it is one of the few renewable energy sources that can provide energy on-demand (often referred to as baseload), with the Spanish Gemasolar power tower plant already producing electricity for 24 hours straight (see Figure 7.10).37 It is dispatchable-on-demand and can therefore firm electricity generation from variable renewable energy technologies such as wind turbines and solar PV. Finally, it has high export potential, with much of the worlds population living near areas with sufficient sunlight to use the technology successfully.38 Australias advantages are already numerous: we have one of the best solar resources in the world (superior to that of Spain, the current leader in CST); enough land
Figure 7.7

area to sharply reduce co-variability of insolation (i.e. with multiple CST locations spread across Australia, simultaneous overcast conditions become unlikely); and a reasonably advanced R&D position, as assessed by the IEA.39 The University of South Australia, for example, is researching high density solar thermal storage techniques that could cut the size of storage tanks by 80-90% and reduce costs significantly.41 Numerous studies have agreed upon the high potential for solar thermal to power a significant proportion of the Australian grid, from BZEs own analysis, to that of the IEA (40% by 2050), Siemens (~25% after 2030), and the University of NSW Institute of Environmental Studies research team (40%).42,43,44,45 CST has been demonstrated at commercial scale and most forms are now at early stages of deployment. Global leadership in this technology is still Australias for the taking: as of July 2012, Spain has just over 1.5GW installed,46 and the US is approaching 1GW.47 Previous analyses of solar thermal technology on a component-by-component basis have argued that a relatively small level of installation may provide large gains in driving the technology to competitiveness. On a component-by-component analysis, Sargent and Lundy estimated as little as 8.7GW of capacity could bring CST to parity.48 The IEA expects that with sufficient investment, solar thermal will become competitive by 2020.49,50 BZE endorses the following IEA recommendations for accelerating solar thermal development: Ensuring long-term funding for additional RD&D in CST technologies and their component parts, across a range of applications and scales; Support CST deployment through long-term, predictable solar-specific incentives especially feed-in tariffs; Streamline procedures for obtaining permits for CST plants and grid access lines.

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Combination of storage and hybridisation in a solar plant40

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Figure 7.8

Price of solar PV in various market types67

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Remote grid applications Mining and resource industries Diesel-fuelled electricity generation for mining projects in remote regions carries a fuel cost of around $250$500/ MWh, around the same price range for energy provided by solar PV. Diesel is, however, currently heavily subsidised by the Australian Government at around AU$2 billion per year,51 reducing its cost to around $100-$175/MWh. If this subsidy were removed, PV would become the most competitive option at many mines today. According to a Climate Spectator analysis, replacing 50% of diesel capacity would see 1900MW of solar PV installed more than all the PV in Australia today.52 Galaxy Resources Mt Cattlin lithium project already sources 15% of its energy from sun-tracking solar panels and plans to source further solar and wind energy to increase this to 100% by 2014.53 At BHPs Olympic Dam mine, geothermal and concentrated solar thermal are expected to become competitive diesel alternatives (although given the lack of incentives and the presence of diesel subsidies, their installation is not yet certain).54 Nations such as Canada, Chile and South Africa are already powering mines with wind and solar technologies.55,56,57, 58 Other opportunities include electric vehicles in mining, with some Canadian mines adopting electric alternatives to diesel mining trucks.59

Australia already exports its resource sector project management and technical expertise around the world. Renewable-powered mining provides an opportunity to expand Australian mining expertise into new areas, clean up metals mining in Australia, and help the rest of the world to follow. In combination with a moratorium on (and eventually a phase-out of) fossil fuel mining, the decarbonisation of metals mining would imbue the Governments Rio+20 claim that Australia is a leader in sustainable mining with an air of credibility.60 Remote community grids Distributed renewable energy is a growing reality for the worlds energy planners. Some thought leaders in the energy sector, such as Jeremy Rifkin and David Crane, view distributed energy in a similar light to mobile telephony: developing countries surprised the telecommunications industry by leap-frogging landline telephones and heading straight to mobile phones.61,62 Mobile phone uptake in the developing world is now at 80%,63 and South Africa has more mobile phones per person than the United States.64 In some parts of the globe, an analogous transformation in energy systems is on the horizon. Fossil fuel power is becoming more expensive and the cost of pole-and-wire grid infrastructure is prohibitive for many of the worlds poorest communities. It will be increasingly passed over as renewable distributed energy sources become cheaper and more reliable, especially as battery costs continue their decline.

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The energy needs of grid-less developing nations are mirrored by those of remote settlements in Australia. These settlements are either connected to microgrids or are off-grid entirely. Whether in Australia or elsewhere in the world, they tend to face high energy costs and energy poverty, yet are also likely to be situated in areas with high grade renewable energy resources. Carl Pope of the Sierra Club provides analysis showing solar PV is ready to replace kerosene for over a billion people around the world. Over a decade, the average poor family spends $1,800 on energy expenditures, says Pope. Replacing kerosene with a vastly superior 40Wp (Watts peak) home solar system would cost only $300 and provide them not only light, but access to cell-phone charging, fans, computers, and even televisions.65 The next step is for the technology to pass on to the further 2 billion people in developing countries who current rely on expensive and unreliable electricity networks. McKinsey analysis has shown that solar power is already cheaper than fossil fuels in such remote settings, and 50GW of potential (off grid and micro-grid combined) exists to 2020 (see Figure 7.8). This is not far off all the solar PV installed in the world today and the advantage of renewable energy in this setting is only set to increase.66 The idea of powering remote Australian communities with renewable energy is not new. In 2010, for example, Horizon Power proposed to the Australian Government that highpenetration renewable energy be installed in more than 100 isolated Australian communities.68 But it has not been recognised for what it is: a genuine opportunity for sustainable economic development, providing financial returns while helping to alleviate poverty. Addressing peak power demand The rapid growth expected in Australian electricity prices over the next few years has little to do with carbon pricing and much more to do with the AU$45 billion grid upgrade that utilities argue is necessary to keep pace with peak network demand.69 In recent years, Australias peak electricity use has grown 260% faster than total electricity demand,70 putting pressure on an aging grid. This trend is evident in many economies across the world, developed and developing alike, driving hundreds of billions of dollars in global grid investment. Australia could instead resolve its grid weaknesses through distributed renewable energy, energy efficiency and socalled smart grid technologies that allow greater control of the demand-side of the grid. Looking at PV alone, globally installed capacity directed at addressing peak demand is likely to reach 150-170GW by 2020 according to McKinsey (see Figure 7.8)71 well over double the amount of PV currently installed worldwide.

Australian innovation in policy and regulatory systems, combined with deployment support, could dramatically reduce Australian grid costs while concurrently developing expertise that can be used in selling grid services to other countries. Advanced grid management technologies are also high in complexity, providing opportunities to develop hardware, software and surrounding services ideal areas for exercising Australias natural advantages in technology and service industries. Finally, technologies like solar thermal with even a small added storage component are particularly suited to meeting the late afternoon power peak, which tends to come a little too late for PV, providing additional opportunities for Australian leadership in peak power management. Renewables integration Finally, the IEA identifies renewable energy integration into grids as a growing issue as renewables penetration increases providing another area in which Australia can build local expertise.72 Australia has the natural advantages of excellent resources across a wide range of renewable energy sources, a large national grid to limit co-variability, and the high wind penetration that already exists within South Australia (peaking at around 31% recently),73 which has helped drive Australian research into renewables integration to a world-leading standard. There is currently a window of opportunity to install solar thermal power stations in South Australia as a replacement for the Playford B and Northern coal power stations in Port Augusta.74 This would avoid the misstep of committing to a gas-fired future for the region, while also allowing Australia to build experience with solar thermal dispatchability alongside wind energy a combination likely to be a crucial energy mix in the future, as demonstrated in the ZCA Stationary Energy Plan.

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7.3.2 Coordinating with Like-Minded Countries

RD&D collaboration Collaboration acts as a multiplier of lone research efforts.75,76 An idealised global RD&D program would facilitate immediate information and resource sharing between teams working on common problems, allowing cross-fertilisation of skills and ideas, preventing duplication of effort and providing for economies of scale. Such a system is of course counter to the purposes of much private RD&D to protect discoveries from competitors but is an ideal that the international community should strive for in solving a global commons problem like climate change. As many policy makers have argued, it is important that zero carbon RD&D programs are structured to encourage broad dissemination of the scientific and technological outcomes.77

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The most effective RD&D networks draw their membership from a variety of institutions that have an interest and a role to play in a successful innovation program: leading technical institutions, funding agencies, private sector leaders and international organisations. The United States ARPA-E program, for example, funds high-risk, highreward technology development that can then qualify for venture funding within a few years. Many of the extremely competitive ARPA-E awards have been won by universityindustry collaborations a testament to the value of crossing institutional boundaries for high-value research.78

Many networks and research centres of this type already exist but gaps remain. Many are ineffective due to a lack of clear purpose (Australias Global CCS Institute, for example) or financial backing. The primary novelty of the approach we suggest is the extent to which these arrangements are supported. Funding must be sufficient to enable research partnerships to deliver multiple largescale demonstrations across numerous technology types. Regular to-scale demonstration and deployment will significantly enrich efforts to accelerate price reductions. The first step for Australia would be to commission an assessment of present international RD&D networks across its technology priorities, working to fill any gaps and expand the capacity of those networks already successfully running and draw their centre of gravity towards Australia. Australias commitment to providing a comprehensive support environment for RD&D within its borders and leveraging the private capital needed to undertake meaningful demonstration projects would attract world-leading expertise. Intellectual property concerns in the context of shared technology programs remain a key barrier, but a surmountable one. The US National Renewable Energy Laboratory (NREL) has developed the Cooperative Research and Development Agreements (CRADA) process,80 which is executed whenever a partner and the lab collaborate on a project. The proposed project is

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Australia should aim to work closely with other nations that hold leadership positions across its national technology priorities. For example, an Australian CST RD&D network would develop links with universities, private companies, and government agencies in countries such as Spain, the United States, Israel and the United Arab Emirates. The network would accelerate progress through holding forums, sharing data and methods, exchanging researchers, undertaking joint projects and pooling resources . To drive progress at the accelerated rate needed, activities would be coordinated as part of an internationally agreed CST roadmap, used to set targets and review progress on an annual basis. Similar collaborations could be formed around photovoltaics; batteries; high-penetration wind; enhanced geothermal; biofuels; and zero carbon steel production.
Figure 7.9

Clean technology collaboration model79

Researcher Exchange & Training Programs Strengthen Regional Centers & Networks Expert Networks

Technology Networks Global and Regional

Technology Standards, Testing, & Certification & Training Programs Portals with R&D Data, Methods, & Tools

Technology Roadmaps & Action Plans Global, Regional, & National

R&D Cooperation

Emerging Technology Demonstration Programs

Joint R&D Solicitations

Multilateral & Bi-lateral R&D Projects

Demonstration Partnerships

Expanded Developing Country Demonstrations

Figure 1. Possible integrated framework for clean energy R&D cooperation.

As described in this section, the individual technology networks could have primary

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discussed with the relevant NREL technical contact, project goals and IP issues are reviewed, negotiated, and finally the agreement is signed, recognising the joint commitments of NREL and its partner to achieve the projects goal towards commercialisation. It protects a companys and NRELs existing intellectual property, and allows the company to negotiate for an exclusive field-of-use license to subject inventions that arise during the CRADAs execution.81

Coordinating assistance for developing nations Developing nations and especially the least-developed nations face difficulties in promoting and financing RD&D, and in participating in collaborative networks, that developed countries do not. They are impeded by high-risk finance (due to higher levels of political and economic instability), lack of technology standards, and cooperation and industry partnerships. Support market development to reduce hurdles to commercialisation - through market assessment, intellectual property protection, promotion of supportive policy, undertaking multilateral projects. Expand awareness of CSTs potential to address energy and environmental challenges - through information dissemination, membership expansion, and partnerships with other organisations. Its technology development program specifies a roadmap for CST split into thematic areas of work, or Tasks, that SolarPACES teams cooperate to progress. A shared R&D platform in the Spanish province of Almeria, the Plataforma Solar de Almeria, is home to a number of SolarPACES major test projects (such as testing of the components later used in commercial projects e.g. the PS10 power tower),85 and is the largest centre for CST RD&D in Europe. The Platforms wide range of test projects enable in-the-field learning for international teams studying CST systems. The SolarPACES program, and the RD&D platform in Almeria, is a model for Australian engagement in zero carbon technology innovation. Certainly, at the funding levels recommended in the ZCA Stationary Energy Plan, Australia can rapidly become a world centre for deployment and RD&D in technologies like CST.

Box 7.4: The SolarPACES Collaborative Network

SolarPACES (or Solar Power and Chemical Energy Systems) is an international cooperative RD&D network that has driven advances in CST since 1977. It is one of a number of IEA Implementing Agreement programs that bring together teams of national experts from around the world to accelerate technology innovation. It has the explicit aim of removing technical barriers to commercialisation, and has been perhaps the central influence in the development of CST over the past four decades. Today, its membership of 20 countries includes countries from Australia to Spain, South Africa, the United Arab Emirates and the United States. Partnerships with private entities in the energy industry play a key role, and indeed the involvement of some nations such as Australia has been driven primarily by industrial consortiums. In the case of Australia, membership was initiated through a consortium of state energy utilities, now joined by the University of New South Wales. The SolarPACES network pursues three core strategic goals:82,83 Support technology development by leveraging national resources - through international RD&D

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Figure 7.10

Torresol Energy Gemasolar Thermosolar Plant 84

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gaps in expertise across the renewable energy value chain, from initial procurement to operation and maintenance. Projects can therefore attract prohibitively large additional costs and outcomes may be a poor fit for actual community needs. Getting developing nations on to even ground requires substantial technology and expertise sharing. Capacity building in developing nations should be a key secondary goal of Australias international technology networks. Potential solutions include:86 the NRELs proposed funding of demonstration projects in developing countries to help build local experience across the renewable energy value chain; the Carbon Trusts proposal for establishing Low Carbon Technology Innovation and Diffusion Centers within developing nations, to operate as nodes for coordinating training, demonstration projects and integration of developing nation institutions into international R&D networks; and international finance mechanisms to de-risk private sector investment in developing nations, through providing a special pool of funding to cover the country risk, currency risk and policy risk components of developing country investments.

7.4.1 Sizing the Zero Carbon Economy

Zero carbon products and services are forecast to become a major source of global value and employment: HSBC expects the clean technology market to be worth up to US$2.2 trillion per annum by 2020;87 the IEA estimates that total clean energy investment will need to reach at least US$36 trillion to 2050;88 and recent ILO analysis predicts up to 60 million green jobs by 2030.89 The savings from zero carbon investment from avoiding the purchase of oil, coal and gas are estimated by the IEA to reach as high as US$150 trillion by 2050.90 US Department of Energy analysis shows that clean energy technology could create 750,000 jobs in the US as early as 2020,91 while Germany already has almost 400,000 jobs across its zero carbon energy industries.92 The worlds major economies are racing to capture this value. China, Germany and the US have been vying for supremacy in renewable energy markets with an aggression that has led to talk of renewable energy trade wars.93,94 2012 has been a particularly heated year: the US won its case against Chinese PV export dumping in the World Trade Organisation and applied import tariffs of 31% to 250% on Chinese solar power imports.95 Germany is now preparing to bring similar claims.96,97 Japan and the

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7.4 The National Interest in Renewable Technology Deployment and Development

This section argues that Australian investment into zero carbon technology innovation, combined with a push for 100% economy-wide decarbonisation by 2030, is not only a reasonable response to the threat of climate change but is also in our long-term economic interests. Australia can use its present wealth to transform itself to a zero carbon superpower over the next decade, preparing for a decline in the fossil fuel trade (see Chapter 8) and success in the multi-trillion dollar global industry in clean energy and environmental goods and services. This section examines: Expected growth in clean tech markets: Zero carbon technology market growth has been exponential over the past decade, and will soon reach into the trillions of dollars in annual value. Competition is becoming fierce, and leading nations, such as the US and Germany, are reaping dividends in export value and employment. Australian opportunities: Australia has a host of natural advantages in clean tech markets, and significant potential to capture its share. Australia can become the go-to country for expertise across the clean tech value chain from finance to software, manufacturing, project development and operation and maintenance.

Box 7.5: The Economics of Germanys Renewable Energy Act

The investment represented by Germanys Renewable Energy Sources act is substantial, at 9.4 billion annually and so are its benefits: Jobs growth: 382,000 jobs, including some 125,000 in solar energy.106 Sales value: Around 25.3 billion in total sales value, for around 70,000 (or AU$85,000) per job.107 Around 50% of is PV exported,108 to be raised to 80% by 2020,109 and 75% of wind turbines are exported.110 Wind exports reach 4.7 billion and PV exports more than 8 billion each year.111,112 Energy savings: Yearly savings from the Merit Order Effect of around 3.5 billion, and avoided energy imports worth 6.7 billion.113 Zero-carbon energy. In 2011, Germany met 16.8% of its electricity needs, 9.8% of heating needs, and 5.8% of transport needs with renewable energy. Four German states met over 40% of their electricity demand with wind alone.114 Emissions avoidance. Germany avoided 107 million tonnes of CO2 from electricity, heat and biofuels investments in 2009.115 Technology price reductions: Since 2006, solar PV system prices within Germany have declined an incredible 65%.116

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EU joined the US to file against China over trade restrictions on rare earth metals materials that are, currently essential for manufacturing zero-carbon technologies from wind turbines to electric vehicles to efficient lighting98 claiming billions of dollars worth of damages.99 And China has lashed back with a complaint against US import duties on 22 Chinese products, including solar panels and wind turbines, and claims that the US paid unfair subsidies for six major renewable energy projects.100 Chinese investment in renewable energy has reached stellar levels. As Hari Chandra Polavarapu, an analyst at Auriga, New York, put it, [y]oure competing against a sovereign when youre talking about the Chinese solar industry. Its economic warfare.101 Yet this is not an area in which China is the inevitable victor. With all the anger from the US, one might well think China was dominating solar exports to the detriment of other nations, but in

reality, the US is competing well on both price and quality. In 2010 the US imported US$3.8 billion in solar products, but exported US$5.6 billion. Its solar balance of trade with China gave the US a surplus of US$247 million.102,103 Germany, too, is reaping significant rewards from its renewable energy policies: the nation has 367,000 jobs in renewable energy today, and a majority of its wind and solar products are exported. Even with slow growth of exports, the policies will create 150,000 more jobs than a business as usual trajectory by 2030, or around 185,000 under more optimistic conditions. Total German employment in the renewable industry is estimated to reach up to 600,000 people by this time (see Box 7.5).104

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Figure 7.11

The PV value chain105

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7.4.2 Australian Opportunities in Clean Tech Markets

Australia has, rather short sightedly, left them to it. This is a tragedy: the quality of renewable resources in Australia is unbeatable; our research talent is on par with the worlds best; and public support for renewable energy development is persistently high.117 Even in the absence of supportive policy for renewable energy deployment, Australia still scores highly on many inputs to innovation, such as its entrepreneurial culture.118 Given the extraordinary growth predicted for the clean tech market, and its long-term future, rational economic policy must consider this an excellent area to begin investing in today to ensure Australia can secure lasting advantages. The most common retort to the idea that Australia could lead in zero carbon technology is that Australia cannot compete in manufacturing. The idea that Australias labour costs make zero carbon manufacturing untenable are contradicted by the success of other nations that are said to have lost competitiveness in manufacturing, like the US in PV production (see Box 7.6 for a brief examination of the barriers to Australian participation in manufacturing). Regardless, this argument is a distraction: manufacturing is just one part of a long, varied zero carbon technology value chain. The US thin-film solar giant First Solar, for example, says that around 33% of its large-scale projects costing is in finance, 33% in balance of system (actual installation costs and additional components like support racking), and 5% in development only around 25% is in the solar PV modules themselves.119 Chinas Suntech, the largest PV manufacturer in the world, agrees, pointing out that, unlike the car industry where 90% of the value is in manufacturing, 50% of the value of PV is created locally.120 Much of the value of the zero carbon economy is found in R&D, software, training, project development, insurance, consulting, finance, operation and maintenance (see Figure 7.11).121 Australia already excels in many of these areas and has strong potential to develop further advantages on the long-term. Consider renewable energy financial and insurance products and services, for example. In the Reimagining US solar financing white paper, Bloomberg New Energy Finance details the proliferation of sophisticated mechanisms being developed for solar PV project financing. Given the range of different renewable energy technologies and applications (beginning with those identified earlier as national priorities), there is wide scope for Australia to become a testing ground for the technical and management expertise that converts projects from high risk to low risk and thereby makes them attractive to large and conservative sources of finance, such as superannuation funds (see Figure 7.13).124

Box 7.6: Australian Clean Tech Manufacturing

The argument that Australia cannot compete in clean tech manufacturing due to labour costs is contradicted by success in other countries that share this challenge, such as the US. Consider the US company First Solar in 2009 the first solar company to achieve under US$1 per watt solar power, and now providing solar for a worldleading US$0.73 per watt. In 2011, it ranked in first place on Forbess list of Americas 25 fastest-growing technology companies. First Solar competes in the same way that Australian companies would compete: on the leading edge of innovation. Australia is in fact closely connected to the worlds largest solar PV company, the Chinese giant, Suntech. Dr. Shi, the founder of Suntech, is an Australian citizen trained in solar technology through a PhD at the University of New South Wales (UNSW). He started his company up in China and drew much of his Suntech team from colleagues at UNSW, and is now one of the wealthiest people in China, valued at around US$3 billion dollars. Dr. Shi left Australia to start Suntech in 2001 a story of lost talent that has been repeated again and again in Australian clean tech. In 2011, Silex Solar, the last PV cell manufacturer in Australia, sent its cell production offshore due to the withdrawal of NSW support for the solar industry (although it still assembles the units in Australia). NSW Energy Minister Chris Hartcher said the industry had been built on the back of government subsidies, but neglected to explain how this differed from any other energy industry in history.122 This is not a fait accompli. Australia can build a domestic zero carbon technology manufacturing industry that can capture global markets. The biggest difference between Australian and US solar manufacturers is the degree of support required to push the Australian industry to reach 5. Navigating the valleystage. of death competitiveness on an international Because of the small size of the Australian market, the leap to participation 5.1 What is the valley of death? in global markets requires additional assistance, after The valley of death is not unique to cleantech or Australia. It has been used to describe the challenges in rolling out information technology and 3G networks where the characteristics which, prices converge with those of countries like the are slow customer adoption, unmanageable platform and device complexity, and an explosion in operating expenses. becomes sustainable (see Figure 7.12 US and the industry The metaphor was rife in science policy in the late 1990s and has been described as the from Ernst & Young).
20

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Figure 7.12

Australian solar manufacturing123

Figure 1: Defining the valley of death22

massive transformational change to address another market where you need new capital, new staff and have to become familiar with new foreign rules. In remote countries like Australia, it is considered partly a function of distance (distance begets an attitude of scarcity) and mindset (adopting a global market perspective).21

Commentators also offered the following explanations for the valley of death:

The valley of death relates to moving from small to large scale finance. The challenge is that if you are not sufficiently advanced in terms of removing the technology risk, and do not have the right corporate partners on board, you end up having to seek all equity for large scale finance. This means that the cost of capital is higher than if it was a bankable project able to attract debt. In this scenario the investment dollars will usually go elsewhere.

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Software and management services are further areas ripe and finance. To revisit their potential market sizes: for leadership, as shown by the global success of Sydney Concentrated solar thermal is expected to be a crucial company CarbonSystems. CarbonSystems recently won an global renewable energy source, providing at least 40% international tender to manage the energy, emissions and of energy needs in sunny environments. Its applications environmental performance reporting across Microsofts range from serving any national energy grids in global operations more than 600 facilities across 110 countries that have reasonable sunlight resources in other words, most of the worlds population to countries. CarbonSystems CEO, David Solsky, says that resources projects and industry demands for heat and Australia is the hottest market in the world for these kinds steam. In addition to grid-scale power production, the of services. This kind of success has been made possible IEA identifies a wide range of niche markets for CST, through existing Federal Government regulations such as from providing heat for industrial processes to the the National Greenhouse and Energy Reporting Scheme production of fresh drinking water.127 (which requires companies to report their greenhouse gas emissions, energy production and energy consumption) PV applications for remote communities and peak and the Commercial Building Disclosure regulations demand management reach as high as 400GW by 2020 (which require sellers and lessors of commercial buildings according to McKinsey or around 3 times the solar USefficiency SOLAR performance WHITE PAPER PV installed so far across the globe.128 Both 4 June 2012 to disclose building energy of these information).126 Just as management guru Michael Porter areas provide opportunities from basic manufacturing argues that stringent environmental regulation promotes to novel system design and finance mechanisms. The most telling statement about this analysis is the absence of a compelling pattern linking solar There could be economic growth by boosting efficiency, so too can Addressing peak demand through PV and smart grid project investment to other asset classes. Investors across a broad spectrum of risk/return meaningful appetite to regulation can boost growth by encouraging innovation efficiency and demand-response programs could profiles, who are otherwise active in investments that could bear resemblance to solar projects, invest in solar projects into entirely new markets.if forestall much of the AU$45 billion grid upgrade have largely not dipped a toe in the water, likely because the asset has not yet been 'configured' investments are currently underway. With widespread deployment to match a identified familiar asset class. The in findings suggest that there could be meaningful appetite if structured to look technology like Each of the national priorities by BZE the US, the Brattle Group estimates potential peak solar project investments are structured to look like other classes. earlier in this Chapter has diverse value chains that will demand savings of US$176 billion.129 Novel smart grid other asset classes vary considerably across applications, especially in their applications range from household demand response 4.2. Evolution of US solar financing service components project development, consulting (e.g. automatically reduced energy use at times of peak
Figure 7.13
The US solar project finance landscape is shifting. Figure 15 illustrates one plausible scenario of how US solar financing could evolve.

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125 Reimagining solar financing Figure 15: Potential evolution of US solar financing

High-liquidity investment vehicles

Today
Development Construction Commission / Operation Development

Tomorrow
Construction
Commi -ssion

Spin-out of operating assets

INFRASTRUCTURE DEBT FUNDS

DEBT

INSURANCE COMPANIES

Bonds / ABS / Crowdfunding

INSURANCE COMPANIES PENSION FUNDS MUTUAL FUNDS RETAIL INVESTORS HEDGE FUNDS

BANKS

BANKS

VENTURE CAPITAL (VC)

HIGH-RISK HEDGE FUNDS INFRASTRUCTURE PRIVATE EQUITY DEVELOPMENT PRIVATE EQUITY

VC

EQUITY

DEVELOPMENT PRIVATE EQUITY

MLPs / SREITs / YieldCos

SMALL/MED DEVELOPERS LARGE DEVELOPERS / UTILITIES BANKS (AND OTHER SELECTED PLAYERS)

INFRASTRUCTURE PRIVATE EQUITY

SMALL/MED DEVELOPERS LARGE DEVELOPERS / UTILITIES ACQUISITIONORIENTED UTILITIES

TAX EQUITY

Syndicated tax equity

BANKS / NON-FINANCIAL CORPORATES >20% cost of equity (unlevered) 9-13% cost of equity (levered) ~7% tax equity yield (af ter-tax, unlevered), ~11% (levered) ~6% cost of debt (capital markets debt f inancing) ~6% cost of equity (unlevered) <6% cost of debt

Source: Bloomberg New Energy Finance

COSTS OF CAPITAL

>20% cost of equity (unlevered)

~15% cost of equity (levered) ~7-9% tax equity yield (af ter-tax, unlevered), ~14-18% (levered) ~6-7% cost of debt

~14% cost of equity (levered) ~6-7% cost of debt

Several fundamental changes appear likely: Participation from investors who have been historically active (banks and federal government)

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demand, to save residents from paying peak prices) to integration with electric vehicles (e.g. charging electric vehicles at low prices, when excess wind energy is being fed into the grid). Under the ZCA Stationary Energy Plan, new models of renewables integration at penetrations never before seen would be developed, with a host of technical insights for grid and market design. Pike Research estimates renewable energy integration in 2012 to be a US$4 billion global market, growing to US$18 billion over the next 6 years a compound growth rate of 23%.

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Innovation spurred as part of RD&D activities related to the other ZCA Plans Transport, Land Use and Buildings would provide a wealth of further opportunities. Australia can become the go-to country for any nation seeking to follow the decarbonisation and energy efficiency pathway. To be conservative and estimate that this crosssectoral investment only allows us to capture 2.15% of the global clean tech market anticipated by HSBC in 2020 a share in line with Australias share in world GDP we would see annual revenue of around US$50 billion. This is some AU$10 billion above the value of Australias total coal exports (a lead that is set to increase with coking coal prices currently collapsing,130,131 as explored further in the next chapter),132 and would provide many, many more long-term jobs.133 Only when Australias fastest growing companies and highest net-worth individuals are, like First Solar and Dr. Shi, drawn from renewable energy industries rather than coal mining can we truly claim to be working towards a Clean Energy Future.

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21. Bronwyn H. Hall et al, Measuring the Returns to R&D (10 December 2009), Chapter prepared for Handbook of the Economics of Innovation, http://emlab. berkeley.edu/~bhhall/papers/HallMairesseMohnen09_rndsurvey_HEI.pdf. 22. Jeffrey Bernstein and M Ishaq Nadiri, Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality, Review of Economic Studies (1989) p 249-269, http://www.econ.nyu.edu/user/nadiri/ pub59.pdf. 23. Valentina Bosettia, Carlo Carrarob, Emanuele Massettic, Alessandra Sgobbia & Massimo Tavonic, Optimal energy investment and R&D strategies to stabilize atmospheric greenhouse gas concentrations, Resource and Energy Economics (2009) 31(2), p 123-137. http://www.sciencedirect.com/science/article/pii/ S0928765509000025. 24. Global gaps in clean energy RD&D, report for the Clean Energy Ministerial, International Energy Agency, (2010). http://iea.org/papers/2010/global_gaps. pdf. 25. Global Gaps in Clean Energy R&D: Update and recommendations for International Collaboration International Energy Agency , (2010) p 7, http:// iea.org/papers/2010/global_gaps.pdf. 26. According the Stockholm International Peace Research Institute (SIPRI), world military expenditure in 2011 was $1.74 trillion: SIPRI, World Military spending levels out after 13 years of increases, says SIPRI (17 April 2012), http://www.sipri.org/media/pressreleases/17-april-2012-world-militaryspending-levels-out-after-13-years-of-increases-says-sipri. 27. Securing a Clean Energy Future, Australian Government (2011) http://www. cleanenergyfuture.gov.au/clean-energy-future/securing-a-clean-energyfuture/. 28. Ross Garnaut, The Garnaut Climate Change Review (2008) Ch 10.1, http:// www.garnautreview.org.au/pdf/Garnaut_Chapter10.pdf. 29. Securing a Clean Energy Future Australian Government, (2011). 30. Ibid. 31. Lenore Taylor, 1.6bn Not Enough to Build Rudds Solar Vision, The Australian (5 September 2009) http://www.theaustralian.com.au/ national-affairs/treasury/bn-not-enough-to-build-rudds-solar-vision/storye6frgd66-1225769698238. 32. Navigating the valley of death: Exploring mechanisms to finance emerging clean technologies in Australia Ernst & Young, (2010) http://www. cleanenergycouncil.org.au/mediaObject/Policy/Navigating-the-valley-ofdeath-CEC/original/Navigating%20the%20valley%20of%20death%20CEC.pdf. 33. Ibid, Figure 4. 34. Ibid, p 34. 35. John Daley and Tristan Edis, Learning the Hard Way: Australias Policies to Reduce Emissions Grattan Institute, (2011) http://grattan.edu.au/static/files/ assets/35ea95b7/077_report_energy_learning_the_hard_way.pdf. 36. Data from Ragwitz, M., Winkler, J., Klessmann, C., Gephart, M. and Resch, G., Renewable energy deployment supported primarily by feed-in instruments, EU-27 countries, (2012) http://www.feed-in-cooperation.org/wDefault_7/ download-files/9th-workshop/presentations/Ragwitz.pdf . 37. Lisa Zyga, Gemasolar solar thermal power plant supplies power for 24 hours straight, Phys.Org (11 July 2011) http://phys.org/news/2011-07-gemasolarsolar-thermal-power-hours.html. 38. Technology Roadmap: Concentrating Solar Power International Energy Agency, (2010) http://www.iea.org/publications/freepublications/ publication/csp_roadmap.pdf. 39. Ibid. 40. Geyer, Combination of storage and hybridisation in a solar plant SolarPACES Annual Report, Adapted by International Energy Agency (2010) http://www. iea.org/publications/freepublications/publication/csp_roadmap.pdf. 41. Giles Parkinson, Solar Thermal: The Search for Cheaper Storage Solutions,

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RenewEconomy (23 May 2012) http://reneweconomy.com.au/2012/solarthermal-the-search-for-cheaper-storage-solutions-16595. 42. Ben Elliston et al., Simulations of scenarios with 100% renewable electricity in the Australian National Electricity Market, Solar 2011 conference, Australian Solar Energy Society, Sydney, (30 November 2 December 2011), http://www.ies.unsw.edu.au/docs/diesendorf-simulations.pdf. 43. Technology Roadmap: Concentrating Solar Power International Energy Agency, (2010). 44. Siemens, What will the future of renewable electricity generation look like? (2010) http://www.siemens.com.au/files/PTF/energy/EnergyCasestudy_ renewables.pdf. 45. Giles Parkinson, Can Solar Thermal Energy Compete on Costs with Wind?,

Nations Environment Programme (2012). http://www.unep.org/ environmentalgovernance/PerspectivesonRIO20/JeremyRifkin/tabid/101085/ Default.aspx. 62. Giles Parkinson, We are missing the boat on clean energy, The Australian (15 June 2012) http://www.theaustralian.com.au/business/opinion/we-aremissing-the-boat-on-clean-energy/story-e6frg9if-1226396021478. 63. Chandra Steele, How the mobile phone is evolving in developing countries, PCMag.com (11 May 2012) http://www.pcmag.com/slideshow/story/297822/ how-the-mobile-phone-is-evolving-in-developing-countries. 64. Per capita mobile cellular data by country, from Nation Master: http://www. nationmaster.com/graph/med_tel_mob_cel_percap-telephones-mobilecellular-per-capita. 65. Carl Pope, Solar power off the grid energy for the worlds poor, Yale Environment 360 (4 Jan 2012) http://e360.yale.edu/feature/solar_power_off_ the_grid_energy_access_for_worlds_poor/2480/. 66. Krister Aanesen, Stefan Heck & Dickon Pinner, Solar powers next shining, McKinsey (April 2012) http://www.mckinsey.com/Client_Service/ Sustainability/Latest_thinking/Solar_powers_next_shining. 67. Ibid, Exhibit 2, p 7. 68. See Horizon Powers submission to the Federal Government on supplying solar energy to 100 remote Australian communities: http://ret.gov.au/energy/ Documents/cei/acre-sub/057a-HorizonPower(Attachment).pdf. 69. Giles Parkinson, Our cheap grid is letting us down: Thats not smart, RenewEconomy (22 February 2012) http://reneweconomy.com.au/2012/ourcheap-grid-is-letting-us-down-thats-not-smart-12041. 70. 2011 Electricity Statement of Opportunities: Update Australian Energy Market Operator, (2012) http://www.aemo.com.au/en/Electricity/Planning/ Electricity-Statement-of-Opportunities. 71. Aanesen and Pinner, Solar powers next shining, McKinsey (April 2012). 72. Tracking clean energy progress International Energy Association (2012), an excerpt from IEA, Energy Technology Perspectives (2012) for input to the Clean Energy Ministerial, http://www.iea.org/papers/2012/Tracking_Clean_ Energy_Progress.pdf. 73. Claire Peddie, Wind powers ahead of coal in electricity production, Adelaide Advertiser (20 March 2012) http://www.adelaidenow.com.au/news/ south-australia/wind-powers-ahead-of-coal-in-electricity-production/storye6frea83-1226304543845. 74. Report sheds light on power stations solar potential, ABC News (19-April -2012) http://www.abc.net.au/news/2012-04-19/report-sheds-light-onpower-stations-solar/3960148. 75. Ron Benioff et al., Strengthening Clean Energy Technology Cooperation under the UNFCCC: Steps towards implementation, US National Renewable Energy Laboratory (August 2010) http://www.nrel.gov/docs/fy10osti/48596. pdf. 76. Facilitating researcher exchanges has been shown to increase RD&D productivity, at least as measured by the rate of patenting and citations, which are generally taken as indications of research value. See, e.g., Department of Innovation, Industry, Science and Research, Australian Innovation System Report 2011 (2011) Ch 4, http://www.innovation.gov.au/ Innovation/Policy/AustralianInnovationSystemReport/AISR2011/chapter-4links-and-collaboration/global-integration/index.html. 77. David C Mowery, Richard R Nelson and Ben R Martin, Technology policy and global warming: Why new policy models are needed (or why putting new wine in old bottles wont work), Research Policy (2010) 39, 1011, 1020. 78. Ernest J Moniz, Stimulating Energy Technology Innovation, Daedalus (2012) 141(2), 81, 86. 79. Possible integrated framework for clean energy R&D cooperation, National Renewable Energy Laboratory (August 2010) Figure 1, http://www.nrel.gov/

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RenewEconomy (7 May 2012) http://reneweconomy.com.au/2012/can-solarthermal-energy-compete-on-costs-with-wind-41615. 46. See Protermo Solar, http://www.protermosolar.com/mapa.html. 47. Renewable 2011 Global Status Report REN21, (2011) p 25, http://www. ren21.net/Portals/97/documents/GSR/GSR2011_Master18.pdf. 48. Assessment of Parabolic Trough and Power Tower Solar Technology Cost and Performance Forecasts Sargent & Lundy LLC Consulting Group, (2003), p Es-3 (commissioned by Us National Renewable Energy Laboratory) http://www. nrel.gov/csp/pdfs/34440.pdf. 49. Technology Roadmap: Concentrating Solar Power International Energy Agency, (2010). 50. Renewable Energy RD&D Priorities: Insights from IEA Technology Programmes International Energy Agency, (2006) p 163-164. 51. Ben Cubby, Miners get $4b in direct subsidies, says Think Tank, Sydney Morning Herald (18 April 2012) http://www.smh.com.au/environment/ conservation/miners-get-4b-in-direct-subsidies-says-think-tank-201204171x5m8.html. 52. Tristan Edis, Mining powered by solar?, Climate Spectator (7 May 2012). 53. Jessica Burke, Australias first 100% renewable energy-powered mine, Australian Mining (6 April 2011) http://www.miningaustralia.com.au/news/ australia-s-first-100-renewable-energy-powered--1- . 54. Giles Parkinson, BHPs Green Tunnel Vision, Climate Spectator (17 May 2011) http://www.climatespectator.com.au/commentary/bhps-green-tunnelvision. 55. Yolandi Booyens, Company on the brink of proving solar energy benefits to industry, Mining Weekly (22 June 2012) http://www.miningweekly. com/article/company-on-the-brink-of-proving-solar-energy-benefits-toindustry-2012-06-22. 56. Editor, Chiles mining industry hunts for renewable energy, Mining.com (23 March 2012) http://www.mining.com/2012/03/23/chiles-mining-industryhunts-for-renewable-energy/. 57. Barrick Opens Wind Farm in Chile, Elko Daily (18 November 2011) http:// elkodaily.com/mining/article_9bed00b6-1207-11e1-a940-001cc4c03286. html. 58. Diavik mine to build wind turbines, CBC News (4 November 2011). http:// www.cbc.ca/news/canada/north/story/2011/11/03/north-diavik-wind-farm. html. 59. Electric underground vehicle revolutionizes the mining industry, Mining. com (13 March, 2012) http://www.mining.com/2012/03/13/electricunderground-vehicle-revolutionizes-the-mining-industry/. 60. See Australian Government, Australias Submission to the Rio+20 Compilation Document (2012) p 8-9; Australian Government, Fact Sheet: Rio+20 and Mining for Sustainable Development (2012); Fergus Green and Reuben Finighan, Denying Responsibility for our Fossil Fuel Exports, The Drum (21 June 2012) http://www.abc.net.au/unleashed/4083938.html. 61. Jeremy Rifkin, The futures lateral: the new (green) economy, United

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docs/fy10osti/48596.pdf. 80. John P Benner, Moving NREL technology to market: Industrial CRADAs, US Department of Energy, presentation (2010). http://www1.eere.energy.gov/ solar/review_meeting/pdfs/prm2010_nrel%20benner_cradas.pdf. 81. National Renewable Energy Laboratory, 35 Years of Innovation (February 2012). 82. SolarPACES Presentation, US Department of Energy, http://www1.eere. energy.gov/solar/pdfs/solar_paces.pdf. 83. Michael Geyer, Gregory Kolb & Patricia Cordeiro, SolarPACES START Missions: A Case Study for IEA, International Energy Association, SolarPACES (2000). 84. Gemasolar Thermosolar Plant, used with permission from Torresol Energy 85. Concentrating Solar Power Projects: Planta Solar 10 National Renewable Energy Laboratory, (April 2009) http://www.nrel.gov/csp/solarpaces/project_ detail.cfm/projectID=38. 86. Benioff et al., Strengthening Clean Energy Technology Cooperation, US National Renewable Energy Laboratory (August 2010). 87. Catherine Airlie, HSBC says low-carbon market will triple to $2.2 trillion by 2020, Bloomberg (September 2010) http://www.bloomberg.com/ news/2010-09-06/hsbc-sees-market-for-low-carbon-energy-tripling-to-2-2trillion-by-2020.html. 88. Steve Hargreaves, IEA calls for $36 trillion more in clean energy investments, CNN Money (12 June 2012) http://money.cnn.com/2012/06/12/news/ economy/iea-energy/index.htm. 89. Transition to green economy could yield up to 60 million jobs, ILO says International Labour Organization, (May 2012) http://www.ilo.org/global/ about-the-ilo/press-and-media-centre/news/WCMS_181795/lang--en/index. htm. 90. Steve Hargreaves, IEA calls for $36 trillion more in clean energy investments, CNN Money (12 June 2010). 91. Increased Environmental Goods and Services Exports = More U.S. Jobs Trade and American Competitiveness Coalition, (2010) http://www. nam.org/~/media/5CCF9590E48E4F9EA287934B31E6B054/Increased_ Environmental_Goods_Exports_Benefit_the_USA.pdf. 92. Gross employment from renewable energy in Germany in 2011 German Government, Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (2011) http://www.erneuerbare-energien.de/english/ renewable_energy/data_service/doc/48528.php. 93. Ehren Goossens, Justin Doom & William McQuillen, Trade war seen looming as China rebukes US support for solar, Bloomberg (26 May, 2012) http:// www.bloomberg.com/news/2012-05-24/trade-war-seen-looming-as-chinarebukes-u-s-support-for-solar.html. 94. Bruce Stokes, Emerging green technology poses threat of trade wars, Yale Global Online (14 May 2010) http://yaleglobal.yale.edu/content/emerginggreen-technology-poses-threat-trade-wars. 95. Ehren Goossens, Brian Wingfield & William McQuillen, US solar tariffs on Chinese cells may boost prices, Bloomberg, (18 May 2012) http://www. bloomberg.com/news/2012-05-17/u-s-solar-tariffs-on-chinese-cells-mayboost-prices.html. 96. Richard Read, SolarWorld cuts up to 300 jobs in Europe, blaming China as another trade complaint looms, The Oregonian (4 June, 2012) http://www. oregonlive.com/business/index.ssf/2012/06/solarworld_cuts_up_to_300_ jobs.html. 97. Emerging green technology poses threat of trade wars, Yale Global Online (14 May 2010). 98. Staff, DoE: Rare earth shortages damage clean tech growth, Business Green (6 January 2012) http://www.businessgreen.com/bg/news/2135403/doerare-earth-shortages-damage-clean-tech-growth. 99. Doug Palmer & Sebastian Moffet, U.S., EU, Japan take on China at WTO

over rare earths, Reuters (13 March 2012) http://www.reuters.com/ article/2012/03/13/us-china-trade-eu-idUSBRE82C0JU20120313. 100. Ksenya, China files WTO complained against US solar tariffs, Solar Tribune (18 May 2012) http://solartribune.com/2012-05-28-china-files-wtocomplaint-against-u-s-solar-tariffs/#.T-MU9rWO1kI. 101. Ehren Goossens, Justin Doom & William McQuillen, Trade war seen looming as China rebukes US support for solar, Bloomberg (26 May, 2012). 102. Steven Lacey, Solar stunner: America is a 1.9 billion exporter of solar products, Renewable Energy World (29 August 2011) http://www. renewableenergyworld.com/rea/news/article/2011/08/solar-stunneramerica-is-a-1-9-billion-exporter-of-solar-products. 103. David Nicklaus, Chinese companies seek tariffs on US-made silicon, STL Today (20 June 2012) http://www.stltoday.com/business/columns/davidnicklaus/chinese-companies-seek-tariffs-on-u-s--made-silicon/article_ d8d47826-bb1f-11e1-96bb-001a4bcf6878.html. 104. Ulrike Lehr & Christian Lutz, Green Jobs? Economic impacts of renewable energy in Germany, World Renewable Energy Congress (May 2011) http:// www.ep.liu.se/ecp/057/vol10/012/ecp57vol10_012.pdf. 105. Value Chain Segments & Activities, Green Rhino Energy, http://www. greenrhinoenergy.com/solar/industry/ind_valuechain.php. 106. Gross employment from renewable energy in Germany in 2011, German Government, (2011). 107. Renewable energy sources in figures: National and international development German Government, Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, (July 2011) http://www. erneuerbare-energien.de/files/english/pdf/application/pdf/broschuere_ee_ zahlen_en_bf.pdf. 108. Solar energy market development German Government, Federal Ministry of Economics and Technology, (2011) http://www.renewables-madein-germany.com/en/renewables-made-in-germany-start/solar-energy/ photovoltaics/market-development.html. 109. Statistic data on the German solar power (photovoltaic) industry German Solar Industry Association, (June 2011) http://www.photovoltaique.info/ IMG/pdf/factsheet_pv_engl.pdf. 110. Wind energy market development German Government, Federal Ministry of Economics and Technology, (2011) http://www.renewables-made-ingermany.com/en/renewables-made-in-germany-start/wind-energy/windenergy/market-development.html. 111. Becky Stuart, BSW: Germany to invest over 5 billion in its solar industry, PV Magazine (10 June 2011) http://www.pv-magazine.com/ news/details/beitrag/bsw--germany-to-invest-over-5-billion-in-its-solarindustry_100003320/. 112. Johannes Schiel, Opportunities for the Wind Industry, VDMA Power Systems (25 November 2010) http://www.giz.de/Themen/de/SID-A80F3DDC37B15698/dokumente/gtz2010-en-01-johannes-schiel-vdma-opportunitiesfor-the-wind-industry.pdf; Wind Industry in Germany, German Wind Industry Association (2011) http://www.wind-energy-market.com/fileadmin/ Bilder_und_Logos/Marktuebersicht/Windindustrie_in_Deutschland_ENG_ Branchenreport.pdf. 113. Renewable energy sources in figures: National and international development German Government (2011). 114. Renewable 2011 Global Status Report REN21, (2011). 115. Renewable energy sources in figures: National and international development German Government (2011). 116. Preisindex Photovoltaik, Bundesverband Solarwirtschaft (2012) http://www. solarwirtschaft.de/preisindex. 117. See discussion and references in Dylan McConnell, Australia must act now on renewables or be left behind, The Conversation (3 August 2011) http://

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theconversation.edu.au/australia-must-act-now-on-renewables-or-be-leftbehind-2631; Peta Ashworth et al, Communication and climate change: What the Australian public thinks, CSIRO (May 2011) http://www.csiro.au/ files/files/p11fh.pdf. 118. Vince Knowles, The Global Cleantech Innovation Index 2012, Cleantech Group (2012) http://www.cleantech.com/wp-content/uploads/2012/02/ CleantechGroup_WWF_Cleantech_Innov_Index.pdf; George Mason School of Public Policys Center for Entrepreneurship and Public Policy, The 2012 Global Entrepreneurship and Development Index (GEDI) (2012) http://66.147.244.232/~lifeats1/cepp/files/pdfs/GEDI2012Austrailia%283%29%5B1%5D.pdf. 119. Tristan Edis, Why Australia must build its own solar future, Climate

131. Peter Cai, Phillip Wen, China finding ways to cut back on coal, Brisbane Times (12 July 2012) http://www.brisbanetimes.com.au/business/chinafinding-ways-to-cut-back-on-coal-20120711-21w91.html. 132. Australias Coal and Iron Ore Exports: 1999 to 2009, Department of Foreign Affairs and Trade, http://www.dfat.gov.au/publications/stats-pubs/australiascoal-and-iron-ore-exports-1999-to-2009.pdf. 133. Based on US figures: see WWF, Getting Back in the Game, http://www. worldwildlife.org/climate/Publications/WWFBinaryitem16415.pdf.

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Spectator (14 June 2012) http://www.climatespectator.com.au/commentary/ why-australia-must-build-its-own-solar-future. 120. Marcus Priest, Surviving the solar-coaster, Australian Financial Review (19 November 2011) http://afr.com/p/national/surviving_the_solar_coaster_6Ca AXWzWWHvq7feq7gi6iN. 121. Ibid; ; Tristan Edis, Follow Apples strategy on solar PV, Climate Spectator (30 May 2012) http://www.climatespectator.com.au/commentary/followapple-s-strategy-solar-pv; Vahid Fotuhi, A trade war with China over solar panels will burn US, The National (30 October 2011) http://www.thenational. ae/thenationalconversation/industry-insights/energy/a-trade-war-withchina-over-solar-panels-will-burn-us; Patrick Stafford, Australian SMEs ripe to benefit from renewable energy push, KPMG report reveals, Smart Company (29 May 2012) http://www.smartcompany.com.au/resources-andenergy/049931-australian-smes-ripe-to-benefit-from-renewable-energypush-kpmg-report-reveals.html. 122. Amos Aikman, Governments withdrawal of solar subsidy scheme leaves industry in trouble, The Australian (18 August 2011) http://www. theaustralian.com.au/national-affairs/governments-withdrawal-of-solarsubsidy-scheme-leaves-industry-in-trouble/story-fn59niix-1226117018314; James Martin II, Silex Solar to outsource solar cell production, modules still to be assembled in Australia, Solar Choice (30 August 2011) http://www. solarchoice.net.au/blog/silex-solar-to-outsource-solar-cell-productionmodules-still-to-be-assembled-in-australia/. 123. Navigating the Valley of Death Ernst & Young, (2010), Figure 1, p 19. 124. Daniel Palmer, Solar PVs new dawn rising, Climate Spectator (29 May 2012) http://www.climatespectator.com.au/commentary/solar-pvs-new-dawnrising. 125. Stefan Linder and Michel Di Capua, Re-imagining US solar financing, Bloomberg New Energy Finance (4 June 2012) Figure 15 www.bnef.com/ WhitePapers/download/84. 126. Giles Parkinson, Tech Focus: Australias new export carbon controls, RenewEconomy (13 March 2012) http://reneweconomy.com.au/2012/techfocus-australias-new-export-carbon-controls-45699; Australian Government, Commercial Building Disclosure (2010) http://www.cbd.gov.au/. 127. Technology Roadmap: Concentrating Solar Power, International Energy Association (2010). 128. Krister Aanesen, Stefan Heck, and Dickon Pinner, Solar powers next shining, McKinsey & Company (April 2012) http://www.mckinsey.com/Client_Service/ Sustainability/Latest_thinking/Solar_powers_next_shining. 129. US Department of Energy Smart Grid: The Value Proposition for Consumers (23 October 2008) http://www.nema.org/Policy/Energy/Smartgrid/ Documents/Assembled_Deck.pdf. 130. Matt Chambers and Rick Wallace, Coal price crash digs a huge budget hole, The Australian (14 March 2012) http://www.theaustralian.com.au/ business/mining-energy/coal-price-crash-digs-a-huge-budget-hole/storye6frg9df-1226298643045.

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Part 8 Ending the Growth in Fossil Fuels: Australias Contribution

Contents
8.1 Introduction  76 8.2 The Problem: More Fossil Fuels Than We Can Safely Burn 76 8.3 8.4 What Should Australia Do? What Effect Would These Actions Have? 8.4.1 Australias Moratorium 8.4.2 Bringing Global Attention to the Issue 77 80 80 81 82 82 84 85 86

8.5

Fossil Fuels: Really in Australias National Interest?  8.5.1 Understated Risk: A Global Carbon Bubble?  8.5.2 Overstated Value: The Minor Role of Coal 8.5.3 Further Research  

References

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8.1 Introduction
Australias potential to lead the world toward the essential goal of cheap and flexible renewable energy presents an extraordinary opportunity to develop world-leading Australian industries and decarbonise global energy supply. It would also pave the way for Australia to draw international attention to the other side of the decarbonisation coin: phasing out fossil fuels.
This chapter highlights a stark reality at the heart of the worlds climate change problem: the world has far more fossil fuels than it can safely burn if we want to avoid catastrophic climate change. Even Australian reserves alone can swallow up the entire worlds carbon budget. Recognising that, at present, even presenting this reality as a problem for discussion is largely taboo both in Australia and the wider world, this chapter outlines a series of steps that our political leaders should take to put the issue squarely on the international agenda. It concludes that: Australia, consistent with the need for it to decarbonise rapidly as discussed in Chapter 6, should impose a federal moratorium on new fossil fuel developments a move that would influence strategic calculations about energy investments in key emerging economies, during the critical decade in which fossil fuel power infrastructure needs to avoid being locked-in. For example, an Australian moratorium would ensure that global coal prices are maintained at their current levels, rather than falling 20-30% below todays level as expected from 2015 to 20201 (a fall that would undermine attempts to slow investment in coal-fired infrastructure during the most critical period). Australia, the worlds largest coal exporter and a major LNG exporter, is uniquely placed to focus political attention on the need to move away from fossil fuels. Leveraging its existing market position and its commitment to a moratorium, Australia should convene world leaders and prominent international experts to discuss options for decarbonising the global energy system through the widespread deployment of renewable energy and the phase-out of fossil fuels. Enacting a moratorium on fossil fuel development is in Australias interests, considering the obvious implications of breakneck growth in our fossil fuel exports for climate change (as discussed in Chapter 3, where Australias footprint ends up as 11% of globally allowed emissions in 2030), and the growing number of mainstream voices (Citibank, HSBC, IHS McCloskey, and many others) that are warning of a fossil fuel investment bubble with significant consequences for the Australian economy.

This chapter hopes to stimulate much-needed public debate about the domestic and global implications of Australias extraordinary investments in fossil fuel exports during the critical decade on climate change. The interests of the Australian people can only be well-served by a more complete discussion of the costs, benefits and risks of the coal and gas boom, and, consistent with this aim, BZE is undertaking deeper research into the structure of an Australian fossil fuel phase out and the replacement of export revenue with zero carbon products and services.

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8.2 The Problem: More Fossil Fuels Than We Can Safely Burn
The continued expansion of fossil fuels is incompatible with the preservation of a safe climate. In Chapter 2, we explained the size of the worlds remaining carbon budget for a 2C trajectory, and the extent to which that budget would be exceeded if existing fossil fuel reserves were extracted and burned. To recap from Chapter 2, combustion of the worlds fossil fuel reserves would release 3,500 billion tonnes of CO2-e enough to exceed the worlds 2C carbon budget by around 8 times. With new discoveries occurring all the time, even this dangerous over-abundance of fossil fuels is an underestimate. Australias reserves of fossil fuels are a substantial fraction of the global total:2 145 billion tonnes of potential CO2-e in currently economic coal and gas reserves one third of the worlds remaining fossil fuel carbon budget; 428 billion tonnes of potential CO2-e in recoverable coal reserves (250 billion tonnes from black coal, and 178 billion tonnes from brown) around equal to the worlds remaining fossil fuel carbon budget.3 If we are to avoid severe climate change well in excess of 2C, fossil fuel reserves within Australia and the wider world must share a common fate: they must be left in the ground. As discussed in Chapter 2, the current decade is widely regarded as critical (even, in fact, by the Australian Government4) because of the implications of current and near-term decision-making for the prospects of a safe climate. There are two reasons for this criticality. First, if we do not invert our emissions trajectory this decade, the challenge of keeping global temperature increases beneath 2C will become practically impossible. Secondly, because typical power stations have an operational lifespan of a half-century or more, any new high-emissions power stations built today will continue to pollute for many decades. Accordingly, in order to meet even the overly-risky 450ppm

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carbon budget, global investment in fossil fuel generation needs to decline to almost zero by 2020, with the vast majority of new-build energy from now until then being zero-carbon. Given the global climate policy imperative (and the significant risks posed by depending on CCS technology, as discussed in Chapter 4), the only safe path is to move quickly to a world in which fossil fuel reserves remain unexploited.

8.3 What Should Australia Do?

Despite the urgent need to decarbonise the worlds economy, the idea of not developing the worlds remaining fossil fuel reserves, let along phasing out existing uses of fossil fuels, is virtually unthinkable for many of the worlds investors and governments. Australia, the worlds largest coal exporter, is uniquely placed to make the unthinkable, thinkable. It is a vexed and sensitive issue, and we cannot pretend to have all of the answers. But below, we outline four significant steps that Australia should take to put it firmly on the international agenda. First, Australia should publicly commit to a moratorium on new fossil fuel developments within Australia. This announcement should be made at the highest levels of government and on the international stage, for example, by the Prime Minister at a G-20 meeting. In this declaration, Australia should indicate its strong commitment to work urgently at home and with other nations towards a world beyond fossil fuels. The declaration of Australias moratorium on fossil fuel export development should be framed as an important, concrete first step that demonstrates the seriousness of Australias commitment. The extent to which this would attract immediate global attention cannot be overstated. Second, Australia should immediately follow through with its international commitment by implementing a federal moratorium on the development of new coal, oil and gas deposits within Australia. Imposing moratoria on resource exploitation is something Australia has done numerous times before. Australias policy regarding uranium developments, its ban on asbestos (see Box 8.3), and its global leadership to ban mining in Antarctica (See Box 8.1) all reveal the potential for moratoria on resources to gain political and social acceptance because of overwhelming security, health and environmental values. There will be outcry from the industry, but no jobs will be lost. Concern over reduced future earnings must be tempered by recognition of the risks of investing further in a global fossil fuel bubble (as explored in Section 8.5) and the incompatibility of the immense exports planned by 2030 with a safe climate outcome that the majority of Australians want.

Third, Australia should convene a high-level panel of independent experts from relevant fields to publish a report making the case for a global moratorium and phasedown of fossil fuels, within a timeline consistent with a global carbon budget for warming of 2C or less. Experts should be drawn from fields such as climate science, climate policy, energy systems, public health, international relations and other fields relevant to the assessment of the impacts of climate change and of fossil fuels. Their report should be widely publicised and promoted by Australia to the international community, including through Australias multilateral and bilateral diplomacy, and through public diplomacy initiatives targeting civil society within countries that are the key contributors to fossil fuel emissions. Australian has on numerous occasions done exactly this in the nuclear field to make the case for the abolition of nuclear weapons (see Box 8.2). Fourth, following the publication and promotion of the report, Australia should convene a summit of world leaders to discuss options to decarbonise the global energy system through the widespread deployment of renewable energy and the phase-out of fossil fuels. Recognising the international sensitivities associated with this issue, it is important that Australia emphasise: its intention for an open and inclusive dialogue from developing country fossil fuel importers and exporters; its willingness to undertake the required action in an internationally equitable way; the leadership responsibilities of developed countries; and the essentiality of developed country provision of assistance to developing countries along the lines outlined in Chapter 6.

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Box 8.1: Conserving the Environment: Securing a Global Ban on Mining in Antarctica
The establishment of a successful treaty to protect the Antarctic environment through a legal prohibition on mining stands as one of the proudest achievements of Australian foreign policy in recent decades. It is also a powerful example of the potential for national environmental activism by Australia to bend the course of history towards resource conservation for the benefit of humankind and other species.

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In response to increasing industry pressure to open up the Antarctic region to mineral exploration and development in the late 1980s, the parties to the 1959 Antarctic Treaty5 adopted the Convention on the Regulation of Antarctic Mineral Resource Activities (CRAMRA) in June 1988.6 The provisions of CRAMRA, while prescribing a strict regime of environmental regulation, ultimately envisage and permit the opening of the Antarctic environment to mining. Presented with a joint recommendation from his Environment Minister and Attorney-General that Australia ratify CRAMRA, then Prime Minister Bob Hawke expressed grave concerns about the potential implications of mining activity for the regions pristine natural environment.7 Against the unanimous view of his cabinet colleagues, and contrary to the prevailing consensus among Antarctic nations, Hawke refused to allow his Government to ratify the Convention. Instead, Hawke launched a bold diplomatic initiative to mobilise international support for an alternative international legal instrument that would comprehensively protect the icy continent. Hawke convinced his French counterpart, Michel Rocard, to join Australia in refusing to ratify CRAMRA, thus precluding its entry into force,8 and the two nations spearheaded the development of the alternative agreement. On 4 October 1991 in Madrid, Spain, 23 of the then 26 consultative parties to the Antarctic Treaty signed the Antarctic Environmental Protocol and its four Annexes, which established a 50 year moratorium on Antarctic mineral resource activities commencing from the Protocols entry into force on 14 January 1998.

The Protocols overarching objective is the comprehensive protection of the Antarctic Environment and dependent and associated ecosystems, based on the conviction that such a goal is in the interest of mankind as a whole.9 It designates Antarctica as a natural reserve, devoted to peace and science and declares, in unqualified terms, that [a]ny activity relating to mineral resources, other than scientific research, shall be prohibited.10 In addition to the 50 year mining ban, the Protocol provides for the conservation of Antarctic flora and fauna, the minimisation and management of waste, the prevention of marine pollution and the protection of special areas of the continent. According to Professors Sands and Peel, authors of a leading textbook on international environmental law, the Madrid Protocol and its Annexes comprise the most comprehensive and stringent regime of environmental protection rules ever established under the rules of public international law anywhere in the world.11 In Hawkes view, the conservation of Antarctica left a legacy for future generations and showed that it was not beyond the powers of one or two people to change something that was wrong.12 It is a legacy Hawkes political successors are equally proud to uphold. In an article published by The Age ahead of the 35th Antarctic Treaty Consultative Meeting in Hobart in June 2012, Foreign Minister Bob Carr and Environment Minister Tony Burke invoked Australias global campaign to preserve Antarctica, placing Hawkes achievements in the early 1990s within a longer tradition of Australian Antarctic leadership dating back to Douglas Mawsons heroic 1911-1914 Antarctic journey:13 Today, as in 1911, Australia is a leading Antarctic nation... Through our scientific endeavours and international collaboration in Antarctica, we strive to understand our planet and our relationship with it. So what would Douglas Mawson make of it all? He would recognise in Australias modern Antarctic endeavours many elements of his legacy that resonate through the years, especially a dedication to scientific excellence and a willingness to lead from the front in Antarctica. Its a proud legacy and one in which all Australians should take pride.

Box 8.2: International Security: Restricting the Use and Proliferation of Weapons of Mass Destruction
Australia is widely recognised as a global leader for its efforts to improve international peace and security through restricting the use and proliferation of nuclear weapons and other weapons of mass destruction. Despite having no nuclear weapons and not subject to an

imminent threat of nuclear attack, successive Australian Governments have prioritised nuclear disarmament and non-proliferation as a foreign policy and national security issue and we have punched well above our weight on the world diplomatic stage.14 After a period in the 1960s and 70s in which Australian governments vacillated over whether to acquire a nuclear arsenal, the Hawke Government ushered in a new era of Australian commitment to nuclear disarmament and non-

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proliferation in the 1980s. During this period, Australia led the way in developing the influential Raratonga Treaty, which created a nuclear free zone in the South Pacific. Extending over a vast area, the South Pacific15 nuclear free zone has been successful at limiting the spread and use of nuclear weapons within the region following years of extensive testing of nuclear weapons. In the context of intractable international nuclear disarmament and non-proliferation negotiations at the time, this was an innovative concept that inspired the establishment of subsequent nuclear free zones among countries in the regions of South East Asia,16 Africa17 and Central Asia.18 Australias determined diplomacy on weapons of mass destruction continued throughout the 1980s and 90s. Persistent and creative Australian arms control initiatives in this period were instrumental in achieving international agreement to the Chemical Weapons Convention in 1992. Important Australian interventions included the establishment of international and industry-focused stakeholder groups to address chemical weapons issues and foster cooperative action.19 Most crucially, to help break the gridlocked multilateral negotiations on the text of the ultimate Convention, Australia took it upon itself to prepare a complete draft text of the Convention text that attempted to provide acceptable resolutions to all of the issues in dispute. Leading Australian arms control expert, Professor Tim McCormack, reflected as follows on Australias role:20 It is now clear that the negotiations would not have concluded in 1992 without the Australian initiative and Australia has justifiably received international acknowledgments for its efforts. The response of the members of the UN Conference on Disarmament and the references [to Australias influential efforts] by representatives at the signing ceremony in Paris reflect something of the standing Australia has attained internationally not only for the initiative of the draft Convention text but also for other contributions to the non-proliferation and disarmament of chemical weapons. In 1995, the Keating Government established the Canberra Commission on the Elimination of Nuclear Weapons. Sidestepping the time-consuming and bureaucratic multilateral negotiation process, the Canberra Commission convened a select group of authoritative and independent experts to prepare a report that would advance the agenda of eliminating nuclear weapons.21 Directly confronting the arguments in favour of nuclear arsenals, the Report sought to reinforce and consolidate the view that nuclear weapons posed an unacceptable risk to the international community. Although this was not a new idea, the idea was to provide an authoritative platform for this position at the international level and to move the debate forward despite the failings of multilateral negotiations. As Paul Keating described it, every country was directly affected

by the nuclear threat, but nothing could happen without the five nuclear powers. We decided, therefore, that the most useful thing we could do was to try to shape the international debate.22 The finished report was handed to the Australian Government, which in turn promoted it to the international community and submitted it to the UN General Assembly and the UN Conference on Disarmament.23 A creative exercise in international norm-building, the report had an immediate effect, transforming the international debate on nuclear weapons from one of reduction to elimination. It served as the catalyst for, and was incorporated into, subsequent reports by a wide range of other influential bodies, including the US National Academy of Sciences.24 A number of other States also publicly adopted the reports key findings. Most influentially, a small group of likeminded governments calling themselves the New Agenda Coalition, led by Ireland and New Zealand,25 released a declaration in 1998 that directly supported the conclusions of the Canberra Commission and served as the basis for a UN General Assembly resolution adopted later that year.26 In the same period as the Canberra Commission released its report, the Howard Government requested that the UN General Assembly refocus its attention on establishing a Comprehensive Nuclear Test-Ban Treaty (CTBT) and submitted a draft treaty to that effect. The General Assembly adopted the CTBT on 10 September 1996.27 And a decade later the Rudd Government established the International Commission on Nuclear Non-Proliferation and Disarmament (ICNND) on 9 July 2008. A joint initiative with the Government of Japan, the report set out a further series of policy steps and guidelines for bringing about the elimination of nuclear weapons. While the CTBT has not yet entered in to force due to a failure of the necessary number of countries to ratify it and it is too early to tell the impact of the ICNND Report, these initiatives provides further evidence of Australias bipartisan preparedness to play a leadership role on a complex matter of long-term, global importance.

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8.4 What Effect Would These Actions Have?

8.4.1 Australias Moratorium
Australias moratorium on new developments would have a significant effect on international energy markets and the energy calculations of coal and gas importers. It is frequently argued that, despite the climate implications, Australia should continue to export coal and gas because there is a growing demand which someone else will supply if Australia doesnt.28 The first problem with this argument sometimes referred to as the dope dealers defence is that it is morally bankrupt. The same logic could be applied to justify Australia exporting uranium to North Korea or asbestos to Africa, for example. Even though there is a market for uranium we apply strict controls to its export, and although there is still a legal and profitable export market for asbestos in the developing world, Australia has banned its manufacture and export (see Box 8.3).

More to the point for present purposes, the argument does not reflect industry realities. Australias projected coal and gas export growth is so large, and new projects take so long to build in potential alternative exporter countries, that the slack leftover from an Australian moratorium cannot be taken up by other countries for many years. The Waterberg mine in South Africa, for example, will take a total of 12-15 years from the application for a mining permit (in 2008) to the commencement of full productivity (in 2020-2023).40 It is typical for coal mines to take as much as 10 years before achieving a positive cash flow.41 As for those nations that are currently increasing their coal exports, they are doing so with Australias plans for export expansion in mind; no nation or investor has foreseen the absence of Australian export growth. Other nations currently developing their coal export capacity, such as Indonesia and Columbia, lack the infrastructure of rail and ports to quickly meet potential demand and are themselves beginning to apply more stringent requirements on investors,42 while the United States is facing growing internal resistance to increasing coal Sciences conference, Biological Effects of Asbestos, before the health risks became widely accepted and difficult to deny.35 Regardless of this overwhelming evidence, the industry continued to grow from around 2 million tonnes of asbestos produced annually in 1960, to roughly 5 million tonnes at its peak twenty years later.36 Successive Australian governments were slow to act on the problem of asbestos and Australias last mine at Woodsreef in NSW closed as late as 1983.37 With national incidence rates for mesothelioma in Australia among the highest in the world,38 Australia has learned the hard way the folly of complacency in the face of evident public danger and now positions itself as a global leader on the issue. Asbestos was named as a priority area at the Australian Labor Party National Conference in the first week of December 2011, at which then foreign minister Kevin Rudd moved a motion on the subject. The motion was successful and the ALP National Platform now states (emphasis added) that:39 Labor recognises the impact of asbestos on the health of those who are exposed to it and the legacy that it will leave, particularly on vulnerable people in the developing world where asbestos is still used. Labor will lead international calls for a global treaty to ban the use of and trade in asbestos and will lead diplomatic efforts on this front including convening a Global Alliance against the Asbestos Hazard Conference in Australia.

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Box 8.3: Protecting Human Health: Leading Global Efforts to Ban Asbestos
The struggle to eliminate asbestos provides a further example of Australias willingness to lead global efforts to ban harmful industrial activities albeit, in this case, a leadership role that was embraced too late for many workers affected by the industry. Yet, despite the well-established dangers of asbestos,29 there remains a significant global market for the product and it is not the subject of any global ban. More than 2 million tonnes of asbestos is produced each year, primarily for consumption in the developing world, with the seven largest producers Russia, China, Kazakhstan, Brazil, Canada, Zimbabwe and Colombia responsible for 96% of production.30 Owing to the determined opposition of asbestos mining and manufacturing countries, asbestos is not included on the list of materials subject to the Rotterdam Convention,31 the purpose of which is to protect developing countries from the importation of hazardous chemicals by ensuring their prior and informed consent.32 In Australia, the manufacturing, trade and importation of asbestos have been banned since 2003.33 But the ban was a long time coming; the history of asbestos in Australia illustrates the potential for powerful industries with vested interests to delay the development of such principled, science-based regulatory regimes by lawmakers at great human cost. Even though many of the health risks of asbestos were known since the 1890s,34 it took until around the mid 1960s, with the New York Academy of

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exports that may retard its ability to divert its domestic reserves to export (the City of Seattle, for example, has banned the passage of coal destined for export terminals through its streets43).44 What would be the effect of halting Australian export growth? For context, international coal markets are currently entering a period of oversupply due to a range of influences: lower demand than expected from China, the US unconventional gas boom, and a large number of new mines coming online. This oversupply negatively affects the value of Australian coal projects (as explored in Section 8.5 on the national interest), but more importantly for the issue at hand it will make addressing climate change substantially more difficult. Oversupply means prices will drop. Indeed, the Australian Government has forecast that prices will decline to around 70% of present values for most of this decade and this was before recent data on reduced demand growth in China emerged.45 Crucially, the years during which coal prices are expected to fall are likely to be the most important ones for preserving a safe climate. Not only will these years span the remainder of the critical decade, but they are important years for key developing country importers such as China and India, who are currently making strategic decisions about long-term investments in energy infrastructure.46 Many of todays proposed coal power station projects are on a knife-edge due to risks associated with the future price of coal, concern about climate change and increasingly stiff competition from renewable energy (see Box 8.6 on India) but reduced coal prices would again make coal an all-tooattractive development option. An Australian withdrawal of anticipated supply would contribute significantly to maintaining prices at current levels, causing a collapse in the viability of coal in the eyes of many developing and developed country importers.47 While our share of the global LNG trade is not currently as large, we are on track to be the worlds largest LNG exporter thanks to the sectors rapid growth in Australia. Not allowing any new projects would have a significant impact on the viability of gas as a transition fuel (see Chapter 4) and further boost the business case for renewables in key export markets. Finally, the symbolic impact of the worlds top coal exporter and fastest growing LNG exporter exiting the fossil fuel business should not be underestimated. Even unilateral action by Australia would set an extremely powerful example to other countries. For the world to lose a fossil fuel export superpower and gain a new champion of cooperative, bottom-up decarbonisation would undoubtedly inspire action from other countries.

Crucially, it would also serve to heighten the already building perception of risk for would-be investors in the coal industry: if Australia can abandon coal and gas, who next? That perception would provide a constructive counterpoint to the message implicit in our current approach to fossil fuel exports, which discourages action on climate change in the name of short-term self-interest.

8.4.2 Bringing Global Attention to the Issue

The symbolic and practical impact of an Australian moratorium would be greatly enhanced by the other international actions we propose, above. Even these preliminary steps, backed by Australias firm actions, would make important contributions toward building consensus among nations regarding the decarbonisation of the global energy system. The articulation of a vision, goals and principles by political leaders can play an important role in building consensus on policy directions, and mobilising political constituencies within and across countries to garner support for deeper forms of cooperation and commitment towards those goals.48 Similarly, international dialogue and information exchange between experts and political leaders facilitated through conferences, meetings and less formal networks can catalyse the establishment and dissemination of new ideas and solutions to an international problem, helping to build new norms (see Box 8.4).49 For example, high-level interventions by political leaders and respected experts at important times have served to draw attention to, and refocus international negotiating efforts towards, issues such as reducing nuclear arsenals (see Box 8.2).50

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Box 8.4: The Power of International Norms

In international politics, norms can be extremely powerful forces shaping the actions of states and non-state actors. For example, norms exist that prohibit slavery, genocide, piracy, the testing of nuclear weapons, the use of land mines and cluster bombs, and the mining and sale of certain products.51 Some norms are legally binding, others are not. Norms can be particularly powerful when codified into rules and laws, and even more so when consequences prescribed for their breach are capable of being enforced by legitimate institutions, be it domestically or internationally. But norms are intrinsically powerful they have an effect separately from and in addition to any legal or institutional mechanisms which may exist to support their implementation because they define standards perceived to be normal or appropriate and in so doing exert moral pressure on actors to conform.52

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8.5 Fossil Fuels: Really in Australias National Interest?

It is fair to say that Australias national interest can be identified with the long-term prosperity and well-being of Australian citizens, present and future. Most Australians desire a world without catastrophic climate change a world in which we have reliable access to food, water and security, and trust in the safety of the next generation. Such a future cannot exist without an international community that is able to work cooperatively and meet serious collective threats be they environmental, humanitarian or economic. Australian leadership of the type we argue for in this paper represents a step towards building the trust and credibility that allows global cooperation to occur. Nonetheless, the national interest is typically framed in more narrow economic terms, with an emphasis on short and medium-term impacts upon jobs and the cost of living. In one of the worlds wealthiest nations, constructing the national interest such that we avoid small expenses today at the risk of catastrophic harm tomorrow is clearly shortsighted. Yet Australians are understandably concerned that the elimination of the fossil fuel export industry may adversely affect their daily lives. The link between the fossil fuel industry and the national interest, even when constructed around short-term economic dynamics, has been seriously overstated. The most important shortcoming of the national fossil fuel discussion is that its boundaries have been restricted to business-as-usual forecasts. Under scenarios where coal demand falls short of current expectations (looking increasingly likely), the resulting coal oversupply will both

damage Australias wealth and slow the pace at which climate change can be addressed. Similarly, scenarios where we phase out coal exports beginning with thermal coal sent to developed markets need to be modelled, with fair treatment of the economic benefits of halting the growth of the coal industry.

8.5.1 Understated Risk: A Global Carbon Bubble?

The analytical team at Citi, the worlds largest investment bank, reassessed the value of Australian fossil fuel companies under the assumption that the world successfully takes action to limit climate change to 2C. Under these conditions, Coal & Allied loses 44% of its present value, while Woodside loses 66%.58 HSBC analysis produces similar results: Nick Robins, the head of HSBCs Climate Change Centre of Excellence in London, has warned, Were still pricing [companies in the extractives sector] as if they are all going to be exploited ... This is a particular concern for the UK as our stock market is overweight fossil fuels.59 The stock exchanges of Australia, London, Moscow, Sao Paulo, and Toronto are all estimated to have 20-30% of their market capitalisation connected to fossil fuels.60 Just as irresponsible investments into sub-prime mortgages set off the financial crisis, irresponsible investments into what are being called sub-prime fossil fuel assets are inflating a carbon bubble that may trigger another financial crisis.61 This is a perverse arrangement: livelihoods, communities and pension funds are being built around resources whose value can only be faithfully said to exist if we assume that we will fail to address climate change. If, on the other hand, we successfully address climate change, the bubble

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Box 8.5: Australias Fossil Fuel Obsession

If national industry priorities can be read from government spending, then for the Australian Government the mining industry is national priority number one. Mining subsidies for rail and port infrastructure, and the use of diesel, reach around AU$4 billion each year53 (some 20 times what climate change programs have generally received for the past decade); environmental approvals for mining infrastructure are fast-tracked; and communities in the way of coal mining projects have been dislocated in the name of national interest projects.54 More recently in the Clean Energy Future package, billions in compensation has been gifted to gassy mines, typically the most carbonintensive due to the fugitive methane emissions they release.55 The LNG industry has been similarly offered the red carpet, provoking a backlash among many local communities

affected by coal seam gas developments. And today, a growing number of ports are being constructed along the Queensland coast to provide millions of tonnes of coal and LNG to ships passing through the Great Barrier Reef cause enough for concern that the UN released a scathing report in June 2012, declaring that Australia has failed to protect the reef with an incredible 35 projects scheduled for approval in 2013.56 The World Heritage Committee is now discussing whether the Great Barrier Reef will be added to the list of world heritage sites in danger the so-called an international list of shame because of its condition.57 The fossil fuel extractive industry has somehow become viewed as a proxy for Australias national interest, worthy of vast public subsidies, regulatory fast-tracking and the destruction of national icons. As section 8.5.1 explores, this may prove to be a very costly notion.

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will burst. In the words of Lord Nicholas Stern:62 This contradiction is important. It means that the market has either not thought hard enough about the issue or thinks that governments will not do very much or somewhere between the two. This presents problems for markets assessment of risk; for governments credibility; and for regulators, whose approach appears to contradict their own governments policies. This argument makes no prediction of where the world may go. It points to a logical contradiction between what many governments are saying and what markets appear to believe implying severe risks both to the markets themselves and to the environments that shape lives and livelihoods across the world. There are increasing signs that the bubble is already becoming unsustainable. Growth in coal demand is set to fall well short of industry expectations (see Box 8.6). Yet celebrating this from a climate change perspective would be premature: conditions of lower than expected growth in coal demand will cause global coal oversupply, and result in coal prices crashing.

This would have two effects: Damage the Australian economy in proportion to our continued investment in the carbon bubble. Recent analysis from groups such as IHS McCloskey indicates that even on the short-term prices may fall low enough that many Australian projects will become unviable. Its an unrelenting oversupply story for the foreseeable future says Bruce Jacques of IHS McCloskey. Everybodys getting the feeling theres better places to look.63 Increase the economic incentive for countries to return to building coal power stations. Without a binding international agreement in place, supply and demand will remain trapped in lock-step. Only a steady withdrawal of supply (or withdrawal of expected growth through a moratorium in the short-term) can ensure that oversupply is avoided and prices remain at least at present levels. In other words, it is unwise to invest further in an industry that is both (A) dangerous for the future prosperity of Australia and the wider world and (B) already heading for oversupply. To do so brings serious risks on the short, medium and long-term, with few clear benefits.

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Box 8.6: Popping the Coal Bubble: Chinese and Indian Coal Demand
China and India are expected to be the major growth markets for Australian coal exports, with current trends suggesting that total Chinese demand for coal will balloon from 3.5 billion tonnes today to 5.5 billion tonnes in 2020, and 7.5 billion tonnes (equal to around all the coal used by all nations in the world today64) by 2030.65 Times appear to be changing. Earlier this year China announced that, as part of its current five-year plan, it will cap 2015 coal consumption at a maximum of 4.1 billion tonnes.66 It plans to keep its energy consumption to below 5 billion tonnes of coal equivalent by 2030, through extensive use of energy efficiency (note that, given other fuels and energy sources are counted in this measure of coal equivalent, this means using substantially less than 5 billion tonnes of coal).67 The city of Beijing has set an even more ambitious target, capping energy consumption at 90 million tonnes of coal equivalent and reducing the citys actual use of coal to 20 million tonnes, by 2015.68 Professor Ross Garnaut recently told an economics conference in Melbourne that Coal use [in China] has hardly increased at all despite the growth in the economy... Thats contributing to a surplus of coal in China and internationally, and putting big downward pressure on prices, with implications for Australia.69

Coal industry expectations of India may meet similar disappointments. India is expected to become the worlds top coal importer, with as much as 57% of its long-term coal needs to come from imports. But the Indian coal industry is being slowed by widespread protests against power stations71 and coal import price volatility which have been severe enough that Indian banks have warned of a coal-driven financial crisis.72 Tata Group, Indias largest power company (and indeed largest company of any type, accounting for 5% of the countrys GDP) has said coal-fired power stations have become impossible to develop. Why would anyone want to invest at this stage in a coal project? says Tata Power Executive Director, S. Padmanabhan. Investment has stopped.73 Tatas Chief Financial Officer recently indicated that all plans for imported coal power station projects had been shelved.74 While coal is perceived as increasingly problematic, alternative technologies are rapidly becoming costcompetitive. In the last three months, the governments of India, China and the US all predicted that the cost of utilityscale solar will fall below that of either coal-fired or gasfired generation by the end of the decade. In India, because of its reliance on costly imports and poor infrastructure, it could come as early as 2016 .

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8.5.2 Overstated Value: The Minor Role of Coal

Mining employs only 2% of Australians. BZE takes no issue with the bulk of Australian mining, which provides the metals from which wind turbines and solar thermal towers are made. It is only the small fraction of mining that is responsible for some 800 million tonnes of CO2-e in coal and gas exports that must have no future in Australia. Coal mining employs just 0.3% or some 25 times fewer people than Australian manufacturing. The profits of the mining industry may be enormous, but more than 80% end up overseas and so have little to no local economic value for Australia.75 Even those profits that do stay within Australia end up concentrated in very few hands, which largely explains the rapid growth Australia has seen in the number of so-called ultra-rich mining landholders over the past few years. The usual story told about mining wealth is that, while it may be concentrated in the hands of mining workers and magnates, it trickles down into the rest of the economy and brings prosperity to all Australians.76 This is the story of how mining saved the Australian economy in the recession.77 According to the 2001-2011 Treasury Secretary Ken Henry, however, mining did not save Australia from recession.78 As Henry explained to the Senate Committee, it is true that Australia avoided a recession, but the Australian mining industry actually experienced quite a deep recession in the first six months of 2009 it shed 15 per cent of its workers. Mining investment collapsed, mining output collapsed.79 By definition, industries that collapse and shed workers contribute to the recession, and are not the saviour. More recently, the surprisingly large interest rate cuts of 0.5 points from the Reserve Bank of Australia in May 2012 were in fact partly a response to the failure of mining income to flow into the broader economy.80 The absence of trickle down is partly because the industry employs so few people, and partly due to increased leakage of mining investment into imports. Large amounts of mining investment dollars end up overseas because they are used to purchase equipment from other nations partly because the rules that investors have been offered for some mines, some of which required that 50% of construction value was sourced from China.81 Some well-known mining magnates are even sourcing workers from overseas.82 Gina Rineharts Hancock Prospecting recently won approval to bring in 1700 foreign workers for the Roy Hill mine,83 and six more resource companies are to follow.84 Such moves may accelerate project development and further boost profits for mining investors, but they also further reduce the trickle-down into the rest of the economy.

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The two-speed economy is another well-known sideeffect of the concentrated wealth generated by industries like coal mining and is expected to go into overdrive over the next few years.85 Because the pipeline of investment for mining is so large and so economically profitable for its investors, it draws investment and labour away from other sectors of the economy and from crucial public infrastructure upgrades.86 The hugely profitable mining project pipeline drives up the Australian dollar, making investment in infrastructure projects and industries with more modest returns less attractive, and many other export industries which Australia needs to maintain value and jobs on the long-term no longer viable.87 The China First mines own economic analysis showed that Queensland would lose 3000 jobs and AU$1.25 billion in manufacturing activity, that small-to-medium enterprises and non-mining workers would struggle with inflation, and affordability would decline. The benefits would be concentrated upon those working in (and predominantly those investing in) the China First mine.88 In sum, we have a litany of good reasons to halt growth of the industry: to avoid further sinking Australian wealth into a risky and morally hazardous carbon bubble; to counter global oversupply and affect the calculus being made by would-be coal investors; and to reinvest our wealth into industries that will provide Australia with value in the longterm.

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8.5.3 Further Research

Replacement of fossil fuel industries in Australia is a significant challenge that will require detailed analysis beyond the scope of this paper. The intention of this paper is to flag a number of realities that have not received sufficient attention in mainstream discussions of Australias future: that fossil fuel industries are incompatible with the safe climate Australians desire; that the economic risks created by the fuelling of carbon bubbles are increasingly regarded as dangerous by mainstream banks; and that mainstream forecasts of clean tech market value suggests that Australia is not investing in the areas that will secure prosperity environmental and financial in the long-term. The Zero Carbon Australia Project will be undertaking a detailed plan to show how Australian fossil fuel income can be replaced by zero carbon industries, turning Australia from a fossil fuel giant into a renewable energy superpower. The Renewable Energy Superpower plan will provide more detailed analysis of how an Australian renewable energy product and service export strategy, and a phase-out of fossil fuel industries, can best be orchestrated. For now, with full confidence, we advocate a moratorium on fossil fuel extraction projects and implementation of the Chapter 7 recommendations for establishing Australia as a leader in zero carbon technologies, services and innovation.

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References
1. Arif Syed and Kate Penney, Australian energy projections to 2034-35 Bureau of Resources and Energy Economics (December 2011) Figure E, p 23 http://www.bree.gov.au/documents/publications/energy/Australian-EnergyProjections-report.pdf. 2. 3. 4. Australias Identified Mineral Resources, Geoscience Australia (31 December 2011) http://www.australianminesatlas.gov.au/aimr/index.html Note brown coals relatively low ratio of coal:carbon is due to its high water content, which is what makes it such a low quality fuel. Australias Submission to the Rio+20 Compilation Document, Australian Government (2012) p 10, http://www.uncsd2012.org/content/ documents/692Australian%20National%20Submission%20to%20Rio20%20 Compilation%20Draft.pdf. 5. 402 UNTS 71 (entered into force 23 June 1961). The Antarctic Treaty was established in Washington 1959 to regulate the Antarctic region as a global commons for peaceful purposes, including science research. The Treaty prohibits military activity in the region and prescribes a regime of dispute resolution among the parties. 50 states are party to the treaty, 28 of whom have consultative Status by virtue of their conducting substantial scientific research activity in the region, allowing them to vote; the remaining 22 parties do not have consultative status, meaning they are invited to attend Consultative Meetings but cannot participate in decision-making: Parties, Secretariat of the Antarctic Treaty (2011) http://www.ats.aq/devAS/ats_ parties.aspx?lang=e. 6. 7. 8. Convention on the Regulation of Antarctic Mineral Resource Activities, opened for signature 2 June 1988, 27 ILM 868 (1988) (not in force). Interview: Bob Hawke on Conserving Antarctica, available on YouTube (uploaded 19 February 2012) www.youtube.com/watch?v=iH9l7VmSarU. Under international law, a treaty does not become legally binding upon a particular nation state until both (a) that state has both signed and ratified the treaty; and (b) the treaty has entered into force. Typically, the conditions for entry into force of a treaty are stipulated in the treaty itself and entail the ratification by a minimum number of states. CRAMRA will only enter into force after its ratification by 16 of the Antarctic Treaty consultative parties which participated in the final session of the fourth Special Antarctic Treaty Consultative Meeting, provided that that number includes all the states necessary to establish all of the institutions of the Convention in respect of every area of Antarctica, including five developing countries and 11 developed countries: CRAMRA art 62(1). The decision by Australia and France not to ratify CRAMRA made it unlikely that it will ever enter into force: Philippe Sands and Jacqueline Peel, Principles of International Environmental Law (3rd Ed, 2012) p 582. 9. Protocol on Environmental Protection to the Antarctic Treaty, Secretariat of the Antarctic Treaty (1991) Preamble and arts 2 and 4. 10. Ibid. Arts 2 and 7. 11. Sands and Peel (2012) p 586. 12. Interview: Bob Hawke on Conserving Antarctica, YouTube. 13. Bob Carr and Tony Burke, Uniting in the protection of the great frozen continent, The Age (11 June 2012) http://www.theage.com.au/opinion/ society-and-culture/uniting-in-the-protection-of-the-great-frozen-continent20120610-2041d.html. 14. Stephen Smith, Building Momentum: Australia, Nuclear Non-Proliferation and Disarmament (Tange Lecture, August 2009) http://www.foreignminister. gov.au/speeches/2009/090812_tange.html. 15. South Pacific Nuclear Free Zone Treaty, opened for signature 6 August 1985 (entered into force 11 December 1986). The Treaty prohibits the use, testing and possession of nuclear weapons within the zone and members are

forbidden from acquiring, manufacturing or developing nuclear weapons. Strict controls apply to the export of nuclear materials by members. 16. Southeast Asia Nuclear-Weapon-Free Zone Treaty, opened for signature 15 December 1995 (entered into force 28 March 1997). 17. African Nuclear Weapon-Free Zone Treaty, opened for signature 11 April 1996. 18. Treaty on a Nuclear-Weapon-Free Zone in Central Asia, opened for signature 8 September 2006. 19. Australias key role in establishing the Canberra Group, the Chemical Weapons Regional Initiative and the Government Industry Conference on Chemical Weapons is described in detail in Timothy L H McCormack, Some Australian Efforts to Promote Chemical Weapons Non-Proliferation and Disarmament, Australian Yearbook of International Law (1992) Vol. 14, p 157. 20. Ibid, p 159. 21. See Marianne Hanson and Carl Ungerer, Promoting an Agenda for Nuclear Weapons Elimination: The Canberra Commission and Dilemmas of Disarmament, Australian Journal of Politics and History (1998) Vol. 44, p 542. 22. Paul Keating, Eliminating Nuclear Weapons: A Survival Guide for the Twenty First Century, Lecture, Sydney, 25 November 1998, http://www.acronym.org. uk/dd/dd32/32keat.htm. 23. Canberra Commission on the Elimination of Nuclear Weapons, Report of the Canberra Commission on the Elimination of Nuclear Weapons (August 1996) http://www.dfat.gov.au/publications/security/canberra-commission-report/ CCREPORT.PDF. 24. Other such reports included those by the Stimson Center, the Carnegie Commission on Preventing Deadly Conflict, and the Canadian Parliament: see Gareth Evans, The Canberra Commission on the Elimination of Nuclear Weapons and Subsequent International Developments (Paper presented to the NIRA Round Table, Tokyo, 6-7 October 2000). 25. Other members included Sweden, Brazil, Egypt, Ireland, Mexico, South Africa and briefly Slovenia. 26. Towards a Nuclear-Weapon-Free World: The Need for a New Agenda, Resolution 53/77Y, 13 November 1998. 27. Comprehensive Nuclear Test Ban Treaty, UN GA RES No. A/RES/50/245 (10 September 1996). 28. See Guy Pearse, If we dont export it someone else will etc: Debunking the excuses for Australias precious place in the coal industrys world, School of Political Science and International Studies, The University of Queensland (2011) p 5-6. 29. Joseph LaDou, Barry Castleman et al, The Case for a Global Ban on Asbestos 118 Environmental Health Perspectives (2010) Vol.118, p 897, http://dx.doi. org/10.1289/ehp.1002285. 30. Ibid, p 899. 31. Rotterdam Convention on the Prior Informed Consent Procedure for certain hazardous Chemicals and Pesticides in international trade, opened for signature 10 September 1998 (entered into force 24 February 2004). 32. LaDou and Castleman et al (2010), Case for a Global Ban on Asbestos, p 899-900. 33. Various occupational health and safety statutes control asbestos use in Australia. The importation of asbestos into Australia is prohibited unless certain conditions are met: Customs (Prohibited Imports) Regulations 1956 (Cth) s 4C. The exportation from Australia of asbestos is prohibited unless the asbestos is, or goods in which it is contained are, hazardous waste as defined in section 4 of the Hazardous Waste (Regulation of Exports and Imports) Act 1989 (Cth); Export Control Act 1992 (Cth) ss 7(1)-(3); Customs (Prohibited Exports) Regulations 1958 (Cth) Div. 1, s 4. 34. In 1898 there was an initial reference to the dangers posed by asbestos dust in a British Government Annual Factory Inspectors Report: Jock McCulloch,

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Asbestos: Its Human Cost, University of Queensland Press (1986). 35. Morris Greenberg, Biological Effects of Asbestos: New York Academy of Sciences 1964, American Journal of Industrial Medicine (2003) 43(5), p 543552; Jock McCulloch and Geoffrey Tweedale, Defending the Indefensible: The Global Asbestos Industry and its Fight for Survival (2008) p 89. 36. McCulloch and Tweedale (2008) Defending the Indefensible, p 14. 37. Sid Maher, $14 million loan to save asbestos mine, The Australian (1 January 2009) http://www.theaustralian.com.au/in-depth/cabinet-papers/millions-tokeep-mine-going/story-e6frgd9o-1111118449743. 38. J Leigh and T Driscoll, Malignant mesothelioma in Australia, 1945 2002, International Journal of Occupational Environmental Health (2003) 9(3) p 206. 39. 46th National Conference: National Platform, Australian Labor Party (December 2011) p 204, http://www.alp.org.au/australian-labor/ourplatform/. 40. Developing a massive coal mine in South Africa, Resource Generation (27 July 2010) http://resgen.com.au/static/files/assets/59adaa79/ Presentation_100727.pdf. 41. Jason West, Mining magnate, property tycoon politician? Just who is Clive Palmer?, The Conversation (30 April 2012) http://theconversation.edu.au/ mining-magnate-property-tycoon-politician-just-who-is-clive-palmer-6646. 42. See Indonesias plans to ban low-grade coal exports: Indonesias Coal Sector Could Take a Hit From Planned Export Ban, Fitch Says, Jakarta Globe (8 March 2012) http://www.thejakartaglobe.com/economy/indonesias-coalsector-could-take-a-hit-from-planned-export-ban-fitch-says/503427. 43. War on coal participants all lose out, Wyoming Business Report (1 June 2012) http://www.wyomingbusinessreport.com/article.asp?id=63354. 44. See Sierra Club, Locked-in (2012) http://www.sierraclub.org/international/ lockedin/. 45. Syed and Penney, Australian Energy Projections 2034-35. 46. See Pearse, If we dont export it someone else will, 2011. 47. Ibid. 48. Ruth Greenspan Bell et al., Building International Climate Cooperation: Lessons from the weapons and trade regimes for achieving international climate goals (World Resources Institute, 2012) pp 30, 105. 49. James G. March and Johan P. Olsen, Institutional perspectives on political institutions, Governance (1996) 9(3) p 24764; James G. March and Johan P. Olsen, The institutional dynamics of international political orders, International Organization (1998) 52(4) p 94369; Steven Bernstein and Benjamin Cashore, Complex Global Governance and domestic policies: Four Pathways of Influence (2012) 88(3) p 585, 591. 50. See also the following letter penned by: George Shultz, William Perry, Henry Kissinger, and Sam Nunn, Towards a Nuclear Free World, The Wall Street Journal (15 January 2008) http://online.wsj.com/article/ SB120036422673589947.html - The groups advocacy prompted both major party Presidential candidates, Obama and McCain, to voice their support for that goal and, following his election President Obama announced the US Governments ambition to achieve the goal of nuclear zero and persuaded many other world leaders to express support for that goal: Bell et al, Building International Climate Cooperation (2012) p 87-89. 51. See e.g. Ian Brownlie, Principles of Public International Law (7th ed, 2008). 52. See March and Olsen, Institutional Perspectives (1996). 53. Ben Cubby, Miners get $4b in direct subsidies, says think tank, Sydney Morning Herald (18 April 2012) http://www.smh.com.au/environment/ conservation/miners-get-4b-in-direct-subsidies-says-think-tank-201204171x5m8.html. 54. Andrew Fowler and Peter Cronau, Casualties of the Boom, ABC Four Corners (28 May 2012) http://www.abc.net.au/4corners/ stories/2012/05/25/3510948.htm.

55. Coal mining assistance, Department of Climate Change and Energy Efficiency (2012) http://www.climatechange.gov.au/government/initiatives/ coal.aspx. 56. Stephanie Peatling, UNESCO report scathing of Great Barrier Reef management, Brisbane Times (2 June 2012) http://www.brisbanetimes.com. au/environment/conservation/unesco-report-scathing-of-great-barrier-reefmanagement-20120602-1zo0m.html. 57. Brian Williams, Australia has failed to protect Great Barrier Reef, says United Nations report, The Courier-Mail (21 June 2012) http://www.couriermail. com.au/news/un-attacks-state-failures/story-e6freon6-1226403583149. 58. Giles Parkinson, Woodsides Carbon Challenge, Business Spectator (1 October 2012) http://www.businessspectator.com.au/bs.nsf/Article/CLIMATESPECTATOR-Finding-the-tipping-point-pd20101001-9STLM?OpenDocument. 59. James Leaton, Leaving fossil fuels in the ground, Carbon Tracker Initiative (14 September 2011) http://www.carbontracker.org/infobox/leaving-fossilfuels-in-the-ground. 60. Unburnable Carbon Are the worlds financial markets carrying a carbon bubble?, Carbon Tracker Initiative (2011) http://www.carbontracker.org/ linkfileshare/Unburnable-Carbon-Full-rev2.pdf. 61. James Carrington, Fossil fuels are sub-prime assets, Bank of England governor warned, The Guardian (19 January 2012) http://www.guardian. co.uk/environment/2012/jan/19/fossil-fuels-sub-prime-mervyn-king. 62. Nicholas Stern, A profound contradiction at the heart of climate change policy, Financial Times (8 December 2011) http://www.ft.com/intl/cms/ s/0/52f2709c-20f0-11e1-8a43-00144feabdc0.html. 63. Paddy Manning, Old king coal gets knocked off its throne, Sydney Morning Herald (28 April 2012) http://www.smh.com.au/business/old-king-coal-getsknocked-off-its-throne-20120427-1xpzf.html. 64. Data from Statistical Review of World Energy 2012, BP (2012) http://www. bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481. 65. Du Juan, Coal sector focus of upgrade, China Daily (24 May 2012) http:// www.chinadaily.com.cn/cndy/2012-05/24/content_15372611.htm. 66. AAP, Coal sector to be hit by China cap: Milne, Sydney Morning Herald (14 March 2012) http://news.smh.com.au/breaking-news-national/coal-sectorto-be-hit-by-china-cap-milne-20120314-1v1ld.html; Giles Parkinson, China threatens to pierce coal export bubble, Renew Economy (12 March 2012) http://reneweconomy.com.au/2012/china-threatens-to-pierce-coal-exportbubble-47613. 67. Huo, China to cap energy use for 2015, China Coal Resource (4 May 2012) http://en.sxcoal.com/618/73101/DataShow.html; Energy use may be capped for 2015, China Daily (3 May 2012) http://www.china.org.cn/ business/2012-05/03/content_25288835.htm. 68. Beijing to cap coal use to reduce pollution, China Daily (30 August 2011) http://www.china.org.cn/environment/2011-08/30/content_23310182.htm. 69. Philip Wen Resources, China coal demand set to drop, Sydney Morning Herald (12 July 2012) http://www.smh.com.au/business/china-coal-demandset-to-drop-20120711-21wex.html. 70. Low Carbon Strategies for Inclusive Growth, Government of India Planning Commission (May 2011) http://moef.nic.in/downloads/public-information/ Interim%20Report%20of%20the%20Expert%20Group.pdf. 71. See especially videos at: Justin Guay Sierra Club India Environment Post: Indias Coal Crisis, Sierra Club (5 July 2011) http://sierraclub.typepad.com/ compass/2011/07/india-coal-crisis.html; Justin Guay, The Spark That Ignited Indias Grassroots Anti-Coal Movement, Sierra Club (29 March 2012) http:// sierraclub.typepad.com/compass/2012/03/the-spark-that-ignited-indiasgrassroots-anti-coal-movement.html; Move Beyond Coal, Now!, Sierra Club (September 2011) http://www.sierraclub.org/coal/narratives/; Makarand Gadgil, R-Power wants to scrap Raigad power project, livemint.com (10

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September 2011) http://www.livemint.com/2011/09/10000526/RPowerwants-to-scrap-Raigad.html. 72. Joel Rebello and Anup Roy, Bankers face loan default risk in power sector exposure: analysts, livemint.com (26 Jun 2011) http://www.livemint.com/ articles/2011/06/26203823/Bankers-face-loan-default-risk.html. 73. Natalie Obiko Pearson, Tata Shuns Coal for Clean-Energy Projects in Chase for Growth, Bloomberg (7 March 2012) http://www.bloomberg.com/ news/2012-03-07/tata-favors-wind-solar-as-coal-fed-plants-impossible-tobuild.html. 74. Sanjeev Choudhary, UPDATE 1-Indias Tata to shelve new importedcoal projects Reuters (14 June 2012) http://www.reuters.com/ article/2012/06/14/india-tatapower-idUSL3E8HE3QV20120614.

85. Business Outlook March quarter 2012: Mining investment in overdrive reinforces two speed split for Australian economy, Deloitte Access Economics (24 April 2012) available from http://www.deloitte.com/. 86. Neil Hume, Australia: Mine, all mine, Financial Times (17 June 2012) http:// www.ft.com/intl/cms/s/0/f88223fe-b6d7-11e1-8c96-00144feabdc0.html. 87. Colebatch, Our economic irrationalism (13 March 2012). 88. Denniss, An analysis of the economic impacts of the China First mine (Dec 2011).

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75. David Richardson and Richard Denniss, Mining the truth: The rhetoric and reality of the commodities boom, The Australia Institute (8 September 2011) https://www.tai.org.au/index.php?q=node%2F19&pubid=913&act=display. 76. Tim Colebatch, Our economic irrationalism, Sydney Morning Herald (13 March 2012) http://www.smh.com.au/opinion/politics/our-economicirrationalism-20120312-1uwde.html; Richard Denniss, Mining boom trickle down a myth, ANU professor, Mining Australia (5 September 2011) http:// www.miningaustralia.com.au/news/mining-boom-trickle-down-a-myth-anuprofessor. 77. Michael Stutchbury, How mining helped Australia avoid recession The Australian (10 June 2012) http://www.theaustralian.com.au/ business/opinion/how-mining-helped-australia-avoid-recession/storye6frg9if-1225877644676; Dana Robertson, Henry refutes mining glory, ABC Lateline (27 May 2010) http://www.abc.net.au/lateline/content/2010/ s2911571.htm. 78. Emma Rodgers, Mining tax wont hit babies bums: Henry, ABC News (27 May 2010) http://www.abc.net.au/news/2010-05-27/mining-tax-wont-hitbabies-bums-henry/843230. 79. Pater Martin, Mines jobs peak, but still just 1.6%, The Age (18 June 2010) http://www.theage.com.au/national/mines-jobs-peak-but-still-just-1620100617-yjsi.html. 80. Shane Oliver Australia the RBA, the economy and shares, Switzer (24 April 2012) http://www.switzer.com.au/the-experts/shane-oliver/australiathe-rba-the-economy-and-shares/; RBA minutes show reason for rate cut, The Examiner (16 May 2012) http://www.examiner.com.au/news/local/news/ general/rba-minutes-show-reason-for-rate-cut/2557271.aspx; Weak data, bank hikes led to cut: RBA, Business Spectator (15 May 2012) http://www. businessspectator.com.au/bs.nsf/Article/Weak-data-bank-hikes-led-to-cutRBA-pd20120515-UB36X?OpenDocument. 81. Richard Denniss, An analysis of the economic impacts of the China First mine, The Australian Institute (December 2011) https://www.tai.org.au/ index.php?q=node%2F19&pubid=939&act=display. 82. Tim Boreham, How hard is it to find workers?, The Australian (30 May 2012) http://www.theaustralian.com.au/business/opinion/how-hard-is-it-to-findworkers/story-e6frg9lo-1226374089939. 83. Gemma Jones and Simon Benson, As Australians lose jobs, Gina Rinehart imports 1700 foreign workers, The Daily Telegraph (26 May 2012) http:// www.dailytelegraph.com.au/business/companies/as-australians-lose-jobsgina-rinehart-imports-1700-foreign-workers/story-fndfr3g3-1226367540365; Cynthia Koons, Two-speed economy sparks job spat, The Australian (29 May 2012) http://www.theaustralian.com.au/business/wall-street-journal/twospeed-economy-sparks-job-spat/story-fnay3x58-1226371213186. 84. Cara Waters, New wave of foreign workers in mining will take the choke off small business, SmartCompany (28 May 2012) http://www.smartcompany. com.au/resources-and-energy/049907-new-wave-of-foreign-workers-inmining-will-take-the-choke-off-small-business.html.

Laggard to Leader

Part 9 Conclusion

Part 9: Conclusion

Laggard to Leader

In the months leading up to the 1990 federal election, Liberal Party opposition leader Andrew Peacock made a commitment to reduce Australias domestic greenhouse gas emissions by 20% by the year 2000. The choice available to future generations depends entirely on the decisions we make today, he said in his Millennium Address. If we foul up, our children pay the price.1
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Over the 22 years that have since passed, Australias fossil fuel emissions have risen by 44%,2 and the decarbonisation task before us has become that much harder. Yet still Australia wrestles with the temptation to delay, to abrogate responsibility, and to decide that its children really ought to pay the price. This hesitation is not without cause. Australians are told constantly that the task of decarbonisation is technically unattainable; that escape from fossil fuels is an illusion; that even the most insignificant costs are unmanageable and will spell the end of Australias prosperity; and that Australian leadership would be a meaningless gesture with no real impact. While Australia waits for other countries to find solutions in the critical decade, our governments and industries are busy betting on failure. By enabling such extraordinary growth in coal and gas exports, Australia is catapulting humanity towards the limits of a safe carbon budget while deepening our dependence on industries whose national benefits are overstated and costs under-appreciated. This report has shown that we can make a better bet. By decarbonising our domestic economy, leading global efforts to develop and deploy zero carbon technologies, foreswearing new coal and gas developments and putting the phase-out of fossil fuels squarely on the international agenda, Australia can place its chips squarely behind efforts to restore a safe climate. Critically, we have shown that Australia cannot remain neutral: whether we choose to continue on a path to exporting almost twice as much CO2 as Saudi Arabia or decide to accelerate the global transition to renewable energy, our actions will materially change the odds. Under business as usual, the continuation of Australias already high domestic emissions and the massive growth in our exported emissions will chew up an exorbitant proportion of the worlds remaining carbon budget. It is difficult to imagine a scenario where this course of action does not virtually guarantee that world temperatures are pushed to dangerous levels an outcome that would be devastating for all Australians and fatal to countless people around the world, especially the poorest.

By contrast, we have shown how a wide range of Australian actions relating to renewable energy and fossil fuels could dramatically reduce emissions, shift the energy calculations of rapidly industrialising countries and start to build international consensus about the need to phase out fossil fuels. At the very least, these actions would shift the odds closer toward a sufficient global response to preserve a safe climate. It is this material influence our actions will have on the probabilities of sufficient climate action that provides the greatest justification for Australian leadership, and against business as usual. Yet, tragically, this calculus is rarely factored-in to current debates about Australias policy choices; it remains buried under a suffocating blanket of tired incantations about our inability to make a difference. This report will have achieved much of its aim if future debates about Australias choices in the critical decade are predicated on an understanding that our actions do have global implications; that we do matter. Of course, the benefits to Australia of leading the world in Cooperative Decarbonisation extend well beyond improving the chances of avoiding the impacts of climate change. There are good reasons to think that the measures we propose in this report would result in a healthier, more equitable, less environmentally destructive, more economically prosperous and more internationally respected nation. A strong case can be made that these benefits outweigh the costs of Australian leadership. Leadership in world affairs is, however, about much more than the dispassionate weighing of costs and benefits. Indeed, BZEs case for Australian leadership rests on a convergence of both national interest and ethical responsibility grounds. In Chapter 5 we explained why Australias approach to climate change should be anchored in a new paradigm of Cooperative Decarbonisation. In Chapter 6, we showed that in the case of Australia, which is already emitting way above its fair share of global emissions, there is a great responsibility to lead. This responsibility derives not only from our high past and current emissions and our relative wealth, but from our special capabilities to contribute to the global decarbonisation task. Global leadership, it turns out, is something were pretty good at and widely known for in other contexts. Whereas many countries would recoil at the thought of being an international leader, Australia has often relished the challenge. And we have not only done so when our vital or immediate interests were at stake. Indeed, on many occasions throughout our history, Australian governments have looked beyond the next election cycle beyond even the next generation and opted for the more difficult, but ultimately right, course of action. In a series of case studies presented through the final chapters, we highlighted a number of such occasions moments in our history of which Australians can rightly be proud.

Part 9: Conclusion

Laggard to Leader

But each of these historical triumphs of Australian leadership could have turned out differently had a more conservative attitude prevailed. Prime Minister Hawke could have accepted the advice of his cabinet and ratified the Antarctic mineral resources convention, paving the way for a new growth industry in Antarctic mining. Today, Australian mining companies could have been earning billions in additional profits from the exploitation of Antarctic mineral resources. Likewise, we could have sought to exploit our remaining stocks of asbestos, selling into the market of willing buyers in the developing world while waiting for other countries to agree on an international solution. After all, we could well have said, if we dont supply the demand, other countries will simply fill the gap. We could have waited on the sidelines of the seemingly intractable negotiations over nuclear and chemical weapons, blaming the great powers for their intransigence and shrugging our shoulders because we thought ourselves too insignificant to make a difference. And we could have sat idly by as Cambodia was ravaged by conflict, content in the knowledge that our security interests were not immediately threatened and with an eye to the dollars we could have saved by keeping our troops at home and our diplomats in Canberra. What was it that our leaders mustered when confronted by each of these challenges that is so lacking when it comes to climate change? In a speech given in 2009, then Australian Foreign Minister Stephen Smith made a telling observation about Australias efforts toward nuclear disarmament. The reason for Australias leadership, he explained, lies in the Governments approach to Australias role in the world, how seriously we take the threats posed by nuclear weapons and nuclear proliferation, and how strong our ambition is for the ultimate abolition of nuclear weapons.3 Amid all the arguments about interests, costs, benefits and responsibilities in international affairs, Smiths remark invokes a simpler truth: if something is important enough to you, you do everything in your power to make it happen. If you care, you lead. In this, the critical decade on climate change, is it so difficult to imagine an Australian leader, with gravitas and passion, standing at a podium, addressing the nation on a bold new plan for Australian global leadership towards a zero carbon world? Describing the gravity and urgency of the threat; acknowledging that we are a large part of the problem; persuading us that we have the capability and the responsibility to lead the world toward a different future on a safe and flourishing planet; explaining that leadership will require sacrifices from all of us, but that with those sacrifices will come exciting new opportunities and more creative paths to prosperity; credibly promising that, in the process of our transformation, no-one will

be left behind; warning us that we may not succeed; but reminding us that history would judge us harshly if we did not even try. We can imagine it and this report shows how that vision can be put into practice. Its time for Australia to stop fuelling the problem. Its time to stop making excuses. Its time to stop pretending we cant have an impact. Its time to lead.

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References
1. 2. Andrew Peacock quoted in Guy Pearse, High & Dry (2007) p 127. National Greenhouse Gas Inventory Kyoto Protocol Accounting Framework, Department of Climate Change and Energy Efficiency, http:// ageis.climatechange.gov.au/. 3. Stephen Smith, Building Momentum: Australia, Nuclear Non-Proliferation and Disarmament (Tange Lecture, August 2009).

Australia is only a small part of the climate problem We shouldnt act before the rest of the world Our actions wont make a difference, anyway How many times have we heard these claims? This game changing new report from Beyond Zero Emissions makes the case for Australian leadership on climate change. Laggard to Leader: highlights the true extent of Australias influence over global emissions; demonstrates how the practical, problem-solving approach to decarbonising every economic sector advocated in the Zero Carbon Australia Plans can be leveraged by Australia to achieve major emissions reductions globally while the UN negotiations remain deadlocked; and outlines a series of domestic and foreign policy initiatives that Australia should implement to steer the worlds trajectory towards zero carbon prosperity. About the Lead Authors: Fergus Green is a researcher specialising in climate change law and policy. He is Chairman of the Centre for Sustainability Leadership and a 2012 General Sir John Monash Scholar. Reuben Finighan has a multidisciplinary background spanning the physical, life and social sciences. He is a 2012 Fullbright Scholar and a 2012 Frank Knox Scholar at the Harvard Kennedy School.

Published by Beyond Zero Emissions Kindness House Suite 10, Level 1 288 Brunswick Street Fitzroy, Victoria 3065 www.beyondzeroemissions.org