Follow the money!

July 22nd, 2011

Two of the most stupid arguments against action on climate change can be summarised as:

  1. Merchant bankers (like Malcolm Turnbull) are for an ETS because they will make a lot of money from the trading system.
  2. Climate Scientists only believe in climate change because they only get funding from government and the UN for pro climate change research.

So you want to play follow the money?

Let’s look at the price of coal which has risen over the last 2 years from $65 per tonne to $125 per tonne, for the more than 480 million tonnes mined. So that is $28 BILLION dollars per year increase in the price of coal!! And with Australia’s silly minerals royalty system, all of that money is profit for the mining companies. Perhaps if we are playing follow the money, it is this huge sum that is swaying the opinions of the coal industry?

A tonne of coal produces 3 tonnes of CO2 and about 220 Million tonnes of coal is used locally, so a $23 carbon price represents $15 Billion of the $28 Billion windfall the mining companies are making each year. So of course they are crying because they can see half of “their” candy being taken from them.

Of course it is not actually their coal and most users of coal domestically will initially receive 95% free permits, so the carbon price is likely to reduce the windfall only $3 Billion and the mining companies will get to keep the $25 Billion. That’s right… of the $60 Billion worth of coal currently being dug up each year, the carbon price will only be $3 Billion (5%).

This is an industry that is basking in the super profits of a 120% price rise over the last 2 years and they are seriously trying to say that an additional 5% carbon price will wipe them off the face of the map?

I’m afraid that a carbon price alone will not be able to do that. However, a carbon price re-invested into commercialising renewable energy sources may eventually provide the affordable alternatives that will mean the end of the coal industry (at least for power… it will still be needed for steel).

The money trail from the carbon price does not lead to investment bankers or to colluding scientists. Follow the money and you see that big coal opposes the carbon price because it will reduce their profit margins a little bit and open the door for competitors.

Abbotts Carbon plan

July 16th, 2011

Matt Grudnoff of the Australia Institute has published a short review of the coalitions direct action plan. This excellent analysis shows that the media needs to increase the scrutiny on the alternate governments. Highlights from the review include:

  • Competitive grant programs like the Coalition’s plan have been used extensively by governments in Australia as a way of trying to reduce emissions over the past few years, so we have a wealth of information on how effective these schemes have been in reducing emissions.
  • If we use the average cost of abatement for competitive grant schemes that have been previously conducted in Australia then by 2020 the Fund would have to allocate around $100 billion. That is, on average, $11.1 billion every year to 2020, or put another way, $1,300 per household per year. This is far in excess of what the Coalition has budgeted for.
  • As part of its Direct Action Plan the Coalition proposes to offset 15 million tonnes of emissions from planting trees. To achieve this would require an area of 25,000 square kilometres and about 9,100 gigalitres of water, two and a half times the amount of water proposed to be bought back by the draft Murray Darling Basin Plan.
  • The Coalition’s Emissions Reduction Fund would also require a large number of public servants to administer the tendering process. If we make the generous assumption that the average reduction in emissions per project is 25,000 tonnes then there would need to be about 28,500 successful projects to meet the target. If we assume four unsuccessful projects for every successful one then the number of projects assessed would be close to 150,000.
  • What’s most ironic is that the Coalition’s policy is a caricature of big government programs. It is not surprising then that the Coalition has been unable to find any economist that supports its direct action policy. It has also had great difficulty finding any business leaders to support it either.

Carbon price will not reduce emissions?

July 16th, 2011

So now that we have the details of the Gillard Governments carbon price, it is clear that the emissions of “facts” and slogans from Tony Abbot will not be reduced. The great scare campaigner is now in endless repetition that the governments own figures show that Australia’s emissions will not be reduced in the initial years of the carbon price!

What the great obfuscater deliberately does not say is that before we can reduce our total emissions, we must first reduce the rate of growth in our emissions! CSIRO analysis has shown that Australias emissions over the last 25 years have risen at almost twice the world average rate (and that includes the growth of China, India and Brasil). The carbon prices first job is to arrest this runaway growth and it will be some years before we can actually start reducing total emissions.

So if Tony Abbott wants cuts sooner, does he want us to start with a higher price? Even under his direct action plan, emissions would continue to rise for years (some think forever as direct action is too expensive on it’s own to work).

Abbott is just pandering to the general ignorance that is all too prevalent in the public debate about the carbon price. It is a cheap shot of the highest magnitude because we know that he knows the flaws of his “logic”. He is deliberating poisoning the well of public information for his own political gain. Shame Tony Shame!

Carbon Price Myths

July 11th, 2011

We are spending Billions on reducing emissions!
The carbon price is not about spending Billions, it is about moving Billions from one part of our economy to another part. That money doesn’t vaporise or not become a productive part of our economy. It continues to create jobs and prosperity, but in a different sector of the economy. There is a bit of a worry about buying carbon credits offshore, as that really does move the money out of our economy – but hey that is what our globalised capitalistic economy is all about! Hopefully Australian business will step up and provide sufficient carbon credits on shore… perhaps we could even sell some as an export industry.

The Carbon Price will not reduce emissions
It is true that even with a carbon price our carbon emissions will keep increasing for years. This allows critics to say that it will not reduce emissions! But that is only because our emissions are currently increasing at an alarming rate. Before we reduce our emissions, we must first reduce the rate of increase in our emissions. So with a carbon price our emissions will increase for a while, but they will increase significantly less than if we didn’t have the price. Most importantly the rate of increase will keep reducing until it become an increasing rate of reduction.

The Carbon Price will be the death of the coal industry
Coal mines and coal power stations will not close because of a carbon price, because we need electricity and steel. All it will do is make them more expensive. If nothing else changes then we have to pay a little bit more for our electricity, for which consumers will be well compensated and export industries will be protected. These industries will only close if we find viable alternatives and all the carbon price has done is lowered the economic bar for what is a viable alternative. So if and when these industries close, it will be because we have switched to alternative power sources and materials and it will be these new industries that will provide the jobs and prosperity. If we do nothing at all, then in all likelihood, those alternatives will be invented in other countries (like China, which is investing heavily in renewable energy) and they will get the jobs and prosperity. If we just keep digging up and selling coal, what do we do when China doesn’t want to buy it anymore?

If we compensate for the carbon price, then behaviour wont change!
The carbon price is not about making consumers turn off their plasma TV’s and sell their SUVs. As much as that would be a good thing, the evidence is that consumer demand for energy is pretty inelastic. Power bills have gone up by over 10% in the last 12 months, but that is causing few to turn off the AC or sell the bar fridge. Consumers do get extra dollars in their pockets from the tax cuts funded by the carbon price and initially these will just be used to pay for the more expensive goods and services. But companies will soon realise that if they innovate and come up with low carbon goods and services, then they will not have to pay the carbon price and can sell these services cheaply. These companies will make money from taking market share from the high carbon competitors and consumers will get to save their compensation money consuming the new low carbon goods and services.

The carbon price will send jobs overseas
There are many many factors already sending Australian jobs overseas: the high Australian dollar; the improving education and facilities in countries such as China, Brasil and India; the corporate globalisation culture; our geographic remoteness. So what do we do? Do we give up and just content ourselves with being the world’s quarry and hope that they don’t switch to alternatives to coal and steel? Or do we increase costs slightly so that we can fund the R&D and transitional costs to innovate new industries which we can then export to the world. The costs of the carbon price are tiny compared to the other costs facing our export industries, so rather than considering it as the straw that breaks the camels back, we should think of it as an opportunity to innovate a better transport system than camel trains!

The carbon price won’t cool the planet
OK, so you don’t believe in climate change. It doesn’t matter, as switching away from fossil fuels is the right thing to do anyway. We will soon be paying the price of peak Oil and eventually we will have to deal with peak Coal. If we are to survive as a species, we need renewable efficient energy and those who innovate that first will be able to prosper as well as survive.

Nanny State?

June 27th, 2011

It is an oft repeated refrain that we don’t want to live in a Nanny state and that Governments should not be involved in directing the moral decisions of our lives. But the evidence is that for any significant moral question that has been posed to the Australia public, we cannot act like grown ups and we do need a Nanny!

When cattle are being subject to abuse in Indonesian abattoirs, it appears that individual producers and our local industry is incapable of making a moral decision not to accept the foreign dollar and that only government imposed sanctions are the solution. When the government offered emergency funding to defend against the GFC in the
form of insulation subsidies it attracted shonky contractors to such a scale that people died and houses burnt down. Obviously not only does the government have to set the Australian standards but we need “nannies” on the public purse to monitor every contractor to make sure they adhere to them.

With regards to the greatest moral challenge of our time, we would not need a government imposed carbon price if every individual or company who could afford to pay a bit more, took up the available green options from their power providers. You can get 100% green energy for only 5c more a KW at the moment, which is cheap because of low demand. If we were truly moral people, then voluntary subscription would be enough to drive the change to our power economy.

So please stop the whinging about our Nanny while we continue to act like spoilt children. Only if we can act like grown ups, and demonstrate the ability to make real moral choices on our own, can we do without a government Nanny.

Debunking the carbon deniers

May 31st, 2011

Carbon Dioxide is only 0.039% of the atmosphere!
Well radioactive material is only a small percentage of the fish caught off Fukushima now, but that does not mean it is not a health risk. Concentration is not a measure of potency. Besides, 200 years ago CO2 was only 0.020% of the atmosphere, so we are at 200% of historic levels (see anybody can play the maths game to get numbers that look big or small).

Mankind produces only 3% of the CO2 each year!
The natural sources and sinks of CO2 have been roughly in balance for millions of years. Adding just 3% per year is enough to tip the balance and overwhelm the sinks. So if we just accumulate 1% of that man made CO2, it only takes 100 years to double the total CO2 in the atmosphere, which is exactly what has happened.

One volcano can produce more CO2 than Mankind
Sure! and for 300 million years the planet has been storing away the CO2 output of volcanoes as oil and coal. But in a few short decades we are burning that oil and coal so it is as if 300 million years worth of volcanoes have erupted all in the same century!!!

Our emissions are small part of the total and us changing wont save the planet!
So there is an argument for a global nanny super-state if ever there was one? The concepts of personal responsibility within a state apply equally as well to states within a planet. You see similar selfishness with vaccination, where some parents think that if they don’t take the tiny risk of vaccination for their children, then they wont effect the public health as a whole. But if many parents think that way, then many kids are not vaccinated and you have an epidemic that kills young babies, the elderly and the frail, for whom vaccination is not a protection.

The really selfish thing to do in these circumstances is to act for the communal good, so you can compel others to do the same for your own benefit. If you work against the communal good, then so will everybody else and there are a lot more of “them” than there are of “us”.

Australia should not act first!
Why not? As the world’s highest per capita emitters, there is an economic and moral case that we should have been first to act. Economically as we have further to go to get to a low carbon economy, so we should act early if we don’t want to be left behind. Morally it is tough for us to say to less polluting peoples that they should go first.

But it is already too late for us to act first as there are many emission trading systems already working around the world already. Even developing economies such as India and China have an effective price on carbon through other regulations.

A Carbon Price will wipe our industries off the map!
The impact of a carbon price has been completely overstated and the impact on most industries will be generally between 1% and 5%, which is less than the impacts they take from currency fluctuation, inflation, other taxation and energy price increases due to peak oil and uncertainty around climate action. Plus the price will be introduced gradually and with compensation and assistance, so the carbon price will not be THE END for most businesses. Besides, enterprises can always reduce the costs by acting to reduce their CO2 emissions, so we should not calculate the costs as being all industries continuing business as usual.

Finally there are some business that we do want wiped out, such as brown coal power generation. These are the industries that need to be replaced over time with new low emission industries that will create new jobs.

A Carbon Price will increase the cost of living!
Hang on, you just said that industries were going to carry the costs themselves and be wiped out! They can’t both be hit by the cost AND pass it onto consumers!!!

But let’s assume that business is evil (or stupid (or both)) and does not change and passes on the full cost of a carbon price. Firstly the impact is going to be smaller than other price increases we see due to currency changes, natural disasters, peak oil, and business behaviour that results in record profits and incredible executive bonuses. Energy bills are only a small part of most household budgets and most of us can afford it and it is the future of the planet that we are talking about, so that is probably worth the price of having a slightly smaller plasma TV. For those who can’t afford even a small increase in costs, there will be compensation.

Compensation is just a money-go-round!
If there is compensation for higher prices then a carbon price is just a great big money-go-round. Agreed it is an economic cycle, so let’s assume we all hop (or are pushed) onto the money-go-round and go for a ride. The clever businesses and consumers will then notice that they can step off the money-go-round by switching to cleaner technologies, but keep their piece of the compensation pie. A consumer who buys a cheaper green service can keep their compensation dollars. A business that reduces emissions can undercut competitors that don’t. One by one, we all step off the money-go-round and eventually there is no more money to go around, but that’s OK because now we are all standing in the low carbon economy!

High prices wont make us change our behaviour
It is true that power consumption is a very inelastic demand. Prices have already gone up recently by as much as 60% and that has not made us turn off our air conditioners in any great numbers. It is for this reason that an all of our economy approach is needed. The carbon price must be widely bases so that it will apply to areas where changes can be made- where gas can be used instead of coal, where better insulation is installed when a house is constructed, where solar/wind/geothermal projects get the go ahead they would not have otherwise.

This is not about getting us to turn off the lights. This is about getting us to use better light bulbs powered by better generators and generating jobs and economic efficiencies in the process.

Tony Abbott solves Western Debt Crisis

February 5th, 2010

Tony Abbott’s carbon pollution reduction plan is brilliant! It simultaneously saves us from Global Warming and resolves the Western worlds debt crisis!

It establishes a pay-the-polluter scheme, were we the tax payers have to pay the polluters to reduce their carbon pollutions.

All we need do is take this wonderful model global, and then all of the worlds countries will pay the polluting countries (like Australia) to reduce our pollution. It will be so much more profitable to be paid to *not* export coal than it is to actually export coal. No need for all those expensive ports and ships etc.

I think the pay-the-polluter scheme is a wonderful precedent to set. If we stay ahead of the developing world in pollution production game, then they will forever be paying us to stop. We should immediately switch our R&D capacity (what’s left of it after your last term) to thinking of new polluting technologies.

Australians are world leaders in pollution production now and we can’t let our current socialist government let us drop in the rankings.

gregw@wiltel.org blog

September 14th, 2009

Welcome to my personal blog – as distinct from my work blog. Here I will be able to rant about all sorts of non-PC and NSFW stuff, but will probably just go on about my travelling and sailing.

The domain here (wiltel.org) is the private domain of greg WILkins(me) and jan barTEL. This means that I have yet another email address of gregw (at) wiltel.org.