Home > Environment, Oz Politics > Mike Steketee nails it

Mike Steketee nails it

July 31st, 2010

This account of how Labor choked on climate change seems likely to be the definitive one.

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  1. July 31st, 2010 at 17:14 | #1

    Does he ‘nail it’? What he says is that the ALP is risk-averse and frightened of minorities who oppose action on climate change. Apart from that the article is mainly about the community consensus that exists in Australia to deal with the issue. Its not really an explanation.

    My conjecture is that the ALP has within its ranks as many climate change delusionists as the Liberal Party. Is Martin Ferguson in this camp? The collapse on the RSPT – the government negotiated with the miners about how much tax they should pay suggests to me a party that has been captured by sectional interests.

    Its clear this has happened with the Liberals and I assume the same pressures are occurring within Labor – they are Tweedledum/Tweedledee parties anyway. If Labor loses this election watch for the number of ex-Labor MPs and sitting MPs who resign who end up moving into lucrative industry posts – and particularly mining industry jobs.

    This is a corrupt government on its last legs. In terms of climate change the Liberals are better in the sense that their foolish policies at least offer bigger assured CO2 cuts. That’s why I agree with you and am voting 1 Green but I’ll give my second preference to the Liberals because if I am constrained to give my vote to scoundrels they should at least be administratively effective scoundrels and provide a minimal response to climate change. .

  2. rog
    July 31st, 2010 at 17:49 | #2

    Corruption or inherent intellectual dishonesty? First the Libs capitulated and now the ALP – perhaps we Australians are just too laid back.

    I always thought that climate change was a big vote winner and the ALP promised to do the hard yards and failed to deliver. Many of the other policies were poorly executed and now it looks like any progressive policy will be binned – parochialism reigns supreme.

    A lot of voters were politicised when their super shrank and SMSF trustees dont like losing their tax lurks ie franked dividends – SMSF represent a large proportion of retirement funds. Rudd did a poor job of arguing the case, very poor.

  3. Jim Rose
    July 31st, 2010 at 17:54 | #3

    @hc
    Firstly, when Hawke and the unions negotiated the Accord all those years ago, it includes a wage-tax trade-off and tax reform promises? Was that sectional capture?

    Was the 1985 tax summit anything but a test what the market could bear in lower tax rates in return for a broader tax base? Hawke’s consumption tax failed because of an unwillingness of some players to accept a tax on food. Was that sectional capture?

    How can an idea be popular but still fail at an election? Elections are for testing the will of the people.

    The competing parties invest in marketing their names as symbols of different approaches to governance.

    The defining act of parties is endorsing standard bearers at elections that best represent the ideologies and packages of policies for which the party elicits voter support.

    The last and most powerful piece of political information we all see before we vote is the same. The ballot paper which contains candidate names and parties that endorses them as trustworthy vehicles for what the voter might want to change, keep and do.

    The ALP is unwilling to push forward unilaterally on a price on carbon because it believes it could lose office on that issue alone or in congress with a few others.

    It is generally accepted that, after an election, the losing party’s polices were unpopular and their party’s performance in office or expected performance if they won office was poor, which is why they lost.

  4. Michael of Summer Hill
    July 31st, 2010 at 18:02 | #4

    hc, that is one good reason why Labor should make a pact with the Greens now, people and business want certainty not bulldust.

  5. Alice
    July 31st, 2010 at 18:11 | #5

    @Jim Rose
    Jim Rose – when elections boil down to kissing babies, hair styles, budgie smugglers, new red hair styles, boat people and give aways to marginal seats, and 30 second “debates”…all I can say is bring on the clown show and the big dipper which would be a damn sight more entertaining.
    We are not far from US politics…where its all Hollywood, the “big top show” and nothing of any substance at all.
    Guess TV and advertising did this to us all. We cant think long enough to focus on policy because no-one is actually explaining their vision in any depth.

  6. Rationalist
    July 31st, 2010 at 20:05 | #6

    Everyone is willing to act on climate change, everyone wants deep cuts to carbon dioxide emissions… until they are asked about what cost they are willing to pay. Are people willing to accept doubling or tripling of energy prices, or the loss of hundreds of thousands of jobs? I think I know what the results of polls would be if the question stated: “do you support deep cuts to carbon emissions if these cuts would cause a tripling of power bills and at least one family member to lose their job?”

    The cost of cutting emissions is almost always omitted from generalised climate change polling but when it is, the results are quite remarkable. Particularly remarkable since it is a cost which is transferred to Australians through carbon taxation, increased energy prices and generalised inflation. A cost which is transferred to Australians through carbon leakage as the cost of doing business here is inflated causing business to move overseas where largely the same emissions will occur anyway (this is why the Turnbull-Xenophon plan was decent since the baseline was worlds best practice, there is no point exporting emissions overseas when worlds best practice is already occurring).

    The election of Tony Abbott as prime minister (if it occurs) did not come from nowhere. It stemmed from the back flip on climate change policy. If the Greens supported the ETS back in 2009 then the policy would be law, Rudd would be PM and he would be gliding to an election win right about now. You never know, a speedy recovery in the global economy could have allowed the Greens and Labor to have made the 2009 version of the ETS a bit more comprehensive, but alas due to a lack of pragmatism this will never be the case.

    All in all, I think this is quite comical to be honest.

  7. cbp
    July 31st, 2010 at 21:31 | #7

    @Rationalist
    >> I think I know what the results of polls would be if the question stated:
    >> “do you support deep cuts to carbon emissions if these cuts would cause a
    >> tripling of power bills and at least one family member to lose their job?”

    And if the question was “would you support an ETS if its implementation would cause painful warts to grow on your balls” then I’m sure the answer would be different too. Ask an irrelevant question, get an irrelevant answer.

    >> causing business to move overseas where largely the same emissions will occur anyway

    The thing is, we are all laying on the railroad tracks in a game of chicken right now. A 4+ degree temperature rise is the train hurtling towards us. Everyone is waiting for everyone else to jump first – but thing is, once someone jumps, it becomes safe for everyone else to jump too. I would hope that we are like the mature kid who got up first and walked away, not that kid who got his hands and feet chopped off.

  8. paul walter
    July 31st, 2010 at 22:04 | #8

    It was thePM’s call, ultimately.
    It will take a while for it all to come out in the wash, but I can’t think of anyone who has actually been hurt in the most real senses, pride or maybe a bit of grief; the visssictudes of life.
    No, I like Steketee a lot of the time, sort of the Oz’ answer to Lindsay Tanner. This was a beat up, polite and even partly relevant, but one just the same.

  9. Donald Oats
    July 31st, 2010 at 22:06 | #9

    Hmm, an espresso or two a week now (ie a few bucks a week cost), or a whole world of hurt later (ie 3 to 5C globally averaged temperature rise, bigger hurricanes/cyclones, sea rises along various builtup coastal areas, more formidable droughts, permanent desertification, species extinction rate increases, crop inefficiencies and lower yields, need I go on?). Now sure we all know how Australia is point oh oh oh oh one percent of emissions – talk to the hand – but as is now abundantly clear from Steketee’s article, there is majority opinion on addressing anthropogenic global warming, a much higher majority than on many other social, economic and/or political issues. In spite of the troglodytes in both Labor and Liberal ministries, Australians are showing a non-partisan support for action.

    All they want is to understand the how of it, which is where Steketee’s article is so surprising. The Labor government actually had this understood and had an all out media blitz to put it in terms we can all understand.

    What I don’t get from Steketee’s article is whether it really was Rudd alone who didn’t have the judgement to roll with the media campaign, or whether cabinet was where the problem of judgement arose? Anyone else know?

  10. TerjeP
    July 31st, 2010 at 22:35 | #10

    The ALP can’t save the planet whatever it does. The EU has an ETS but both China and the USA have walked away from the idea. If the EU can’t sway opinion then what little old Australia does sure isn’t going to sway things. I wish people would stop carrying on like it matters what Australia does. Why don’t people expend more time pondering what China will build to power it’s growth? It’s a heck of a lot more relevant. Even if you think we should have a price on carbon because “it’s the right thing to do” you should get over the notion that it matters a whole lot or that Australian voters or politicians are dim for not climbing on board.

  11. July 31st, 2010 at 23:22 | #11

    TerjeP,China hasn’t “walked away” at all. It has a massive program in place to address climate change. It will cut emissions intensities by 40% by 2020 a strong target. It’s rich, selfish countries like the US and Australia which are doing so little. Of course as more countries mitigate their emissions pressure on the US increases.

  12. paul walter
    July 31st, 2010 at 23:27 | #12

    Terje, hc you are both right.
    In some sense youre talking on different levels.
    Put together there is a synthesis there.
    Donald Oats, do you get the impression that federal politics is becoming more Byzantine in its complexity?

  13. Jill Rush
    July 31st, 2010 at 23:56 | #13

    The problem was that the ETS is a dog of a policy. Labor may have dropped the ball on it but the Opposition is even worse and yet according to the polling has been picking up support for doing nothing and wanting to do nothing on climate change.

    I don’t believe that the public were waiting to be convinced they wanted a scheme which rewarded polluters and penalised them. A tax on carbon would be easy to introduce and sell by comparison but the Great Big New Tax line would kill it anyway. Even with a good sales rep the product has to stack up – and it didn’t and doesn’t.

    That’s why a gathering of people for a reasonable period of time to discuss the options is a good idea. For an ETS to get through it does need bipartisan support and this has to come from the people forcing the politicians to take the best steps to solve the dilemmas. Of course Action Man wants “practical” solutions but has stripped the money out of any environmental measures that Labor has created.

    People are not backing Tony Abbott because of disillusion over climate policy. They are backing him because he has made himself over into a man who knows how to cook and kiss babies – just watch him every night on TV.

  14. August 1st, 2010 at 00:00 | #14

    Steketee misses the point: The Liberals and Greens were entirely right to knock back the ALPs Carbon Pollution Reward Scheme, even if the Liberals were doing iot for the wrong reason.

    Had they run with this scheme at a DD, The Greens ought to have campaigned to defeat the legislation.

  15. Jill Rush
    August 1st, 2010 at 00:02 | #15

    For those who would like to see Mr Abbott at a tea party with a baby try here:
    http://www.theage.com.au/federal-election/gillard-to-fight-harder-to-restore-public-faith-20100731-110ah.html

    He was also filmed barbecuing sausages today. Julia should start feeding people especially babies. Forget the climate policy – the surge to Abbott is very primal.

  16. August 1st, 2010 at 03:24 | #16

    I feel particularly vulnerable to one of the foreseeable effects of climate change living close to the bush. Increased frequency of bushfires may be an important, but not necessarily most significant effect of global warming. There was a major fire around here in 1968. I note with some apprehension the outbreak of bushfires in California this summer. There will be costs associated with climate change. In retrospect some of us may regret more enlightened policies were not followed as part of our global responsibility and self interest.

    There is, as Tim Dunlop points out, a lack of leadership and vision on behalf of those that seek the office that should embody those qualities. Most of us do not fully understand the statistics and underlying science of global warming but we can grasp the implications if they are reliably explained. Note that Mike Skeketee says that Julia Gillard discouraged Kevin Rudd from moving forward with a policy on climate change. Part of the job of political leadership is to explain, explain, explain. The current crew seem one and all not up to the job description, or disinclined to bother because of the concerns of select voters in marginal seats.

  17. TerjeP
    August 1st, 2010 at 06:11 | #17

    HC – China is doing lots of things but what I said, quite clearly I thought, is that China has walked away from an ETS.

  18. August 1st, 2010 at 06:40 | #18

    TergeP, they have not walked away from pricing carbon either. It’s an agenda item in their next
    5year plan. It’s now problematic given the extreme US selfishness.

    Jill your view is so blatantly partisan that it amounts to a denial. According to the Climate Institute the carbon cuts implied by the Coalition policies to 2020 are greater than those implied by Labor policy.

    Knocking back the ETS was a foolish action by the Greens. It would have got policy makers to the starting post.

  19. August 1st, 2010 at 06:54 | #19

    @hc

    According to the Climate Institute the carbon cuts implied by the Coalition policies to 2020 are greater than those implied by Labor policy.

    It doesn’t matter what the coalition claims or even whether they believe their own claims. The fact of the matter is that their claims about cuts are not plausible and even if they were, they wouldn’t close to being adequate.

    Knocking back the ETS was a foolish action by the Greens. It would have got policy makers to the starting post.

    No, it would have got the noses of polluters into the public feeding trough for somewhere between $16billion and $22billion and given us no serious result. It also assumed the success of CC&S and relied on the integrity of REDD offsets.

    Both the coalition and the ALP policies were designed to entrench the position of “big filth” and to undermine public support for mitigation by dringing the entire process into disrepute — making energy more expensive without locking in low (and spurious) targets. It was a very good thing that these appalling measures were rejected. We dodged a bullet there.

  20. August 1st, 2010 at 06:55 | #20

    oops: by dringing bringing

  21. August 1st, 2010 at 07:42 | #21

    Fran, you don ‘t engage- just deny. According to the Climate Institute emissions under the Coalition will be one third those of Labor. where have they got it wrong.

    Your claims about the ETS cannot be substantiated. Most free permits went to the traded goods sector as with the Waxman-mar key Bill. Those that went to the power sector were minor by comparison -a couple of billion and nothing like the figures you quote.

    The idea that handing out free permits that had value if traded would ‘entrench’ the position of the power sector is not sensible. They would have had incentives to cut emissions. Currently the sector is asking for a clear carbon price in order to forward plan.

    Or is this again just Laborpartisanship? They welched it on an ETS but who cares as the scheme was lousy anyway. It wasn’t. It would have created a carbon price of around $20 per ton and policy would have been at the starting post. Now we have zero.

  22. gregh
    August 1st, 2010 at 07:45 | #22

    @terjeP re your point on China and anything Aus does being irrelevent. I don’t fully accept that as we can provide a model/evidence base for a particular type of positive action or range of approaches through what we do.

    But we aren’t doing that in any positive sense

    However if catastrophic environmental disaster is inevitable (and I think it is with a reasonable chance) I could understand the Aust govt thinking – the world’s going down the gurgler and there is nothing we can do about it, let’s flog off everything we can and use the money to prepare for the Ugly New World.

    But there’s no evidence for that either.

  23. August 1st, 2010 at 08:01 | #23

    @hc

    According to the Climate Institute emissions under the Coalition will be one third those of Labor.

    So 1/3 of way too little? And that based on soil carbon assumptions that simply can’t be made and “incentives” to business that won’t be taken up seriously. Even Turnbull admitted that they were foing to be a failure.

    The idea that handing out free permits that had value if traded would ‘entrench’ the position of the power sector is not sensible. They would have had incentives to cut emissions.

    Read the Grattan Institute report and get back to me on that … This makes as much sense as claiming that if you print money and hand it out, that people won’t want to trade it in a huge hurry for something that will hold its value.

  24. Michael of Summer Hill
    August 1st, 2010 at 08:02 | #24

    TerjeP , if Premier Wen is true to his word and starts to use an “iron hand” to overhaul the energy sector then it is possible China will come in from the cold when they host the extra round of climate talks in October before the crucial Cancun meeting in December.

  25. August 1st, 2010 at 08:47 | #25

    Fran, the free permits permit pollution but have value if sold. The polluters have incentives to cut the pollution. Is that so complex? They can only trade the permits if they make cuts.

    I didn’t say the cuts by the coalition were substantial or enough. I said that the Climate Institute had estimated they will have three times the impact of Labor’s plans. Again. Is that complex?

    Further misrepresentations will I assume follow.

  26. Jill Rush
    August 1st, 2010 at 09:32 | #26

    hc – The problem you have is that you are relying on the Climate Institute and on information that is way too complex for most people. I do know that most people understand food and taxes but don’t understand the intricacies of carbon measures. It may not be the best thing but that is why pushing through anything substantial has been so hard.

    It is far easier to find ways that the average person understands such as support for domestic solar panels than to subsidise dirty industries. More talk is not the macho way and is frutrating for Action Man but it is more likely to lead to better and longer lasting solutions which actually address the issues since all of the arguing has got us precisely nowhere.

  27. Michael of Summer Hill
    August 1st, 2010 at 10:02 | #27

    Jill Rush, when all is said and done both Party’s will need to have their election commitments fully costed subject to Clause 29 of the Charter of Budget Honesty Act 1998. My understanding is the Coalition are running a phoney campaign and cannot meet their commitments without going into the red.

  28. August 1st, 2010 at 10:51 | #28

    @hc

    The polluters knew the permits would be worth diddly squat in a few years time so it would have made sense to flog them off as quickly as possible. It’s not as if not meeting a target was going to see them shut down or suffer any serious penalty. They could always have bought some dodgy REDD credits if needed for a lot less than they got flogging off the permits.

    OTOH, if they were forced to buy them in a tightening market …

    Putting aside what I would have wanted, it is worth exploring what a modest start that would have been bettter than nothing would actually look like.

    It would have been built around the following:

    1. No free permits: All permits auctioned
    2. All sectors in
    3. Border tariff arrangement meeting no discrimination test
    4. Cap reduces emissions 1% every year until 2015 and then 1.5% every year thereafter until 2020; provision for lower cap to reconcile if other related jurisdictions come on board
    5. No REDD credits

  29. August 1st, 2010 at 10:54 | #29

    5. No REDD credits (unless the jurisdiction could show robust framework for measurement based on carbon-storage-years)

  30. August 1st, 2010 at 11:37 | #30

    Fran, why assume the quotas would be worth noting in the future? They were to be tightened under the original Garnaut proposal. You are objecting to a hypothetical scheme that no one was planning to introduce.

    It’s interesting that you support BTAs which are primarily designed to protect the traded goods sector but oppose free permits to carbon exporters and producers of import-competing local goods. The two measures are trying to do the same thing – tax the local consumption of carbon. I can’t see how you can protect exporters without exempting them from carbon charges and this is an important source of carbon leakages. If you levy local exporters a charger and their foreign competition faces no charge then production will switch toward the foreign producers and carbon emissions by these foreign producers will increase as well.

    These were the issues that guided the original ETS design. If it had gone through without the inept and incompetent opposition from the Greens Australia would now have in place a sensible approach to addressing it’s carbon emissions.

    Quotas would have been cut over time so Australia eventually met reasonable targets and the value of these quotas would not have gone to zero but would have increased at something like the rate of interest.

  31. Michael of Summer Hill
    August 1st, 2010 at 12:17 | #31

    hc, I tend to agree with Turnbull that today’s ‘politics is about conviction and a commitment to carry out those convictions’ and Labor is now paying the penalty for dumping the ETS. But having said that it is not too late for Labor to get back on-track by making a pact with the Greens.

  32. August 1st, 2010 at 12:21 | #32

    @hc

    Fran, why assume the quotas would be worth nothing in the future?

    The European scheme was similar and that’s what happened there. It’s the same thing as what happens when you just print money. It loses its value and people who know that try to swap the notes for tradeable things that don’t lose their value.

    It’s interesting that you support BTAs which are primarily designed to protect the traded goods sector but oppose free permits to carbon exporters and producers of import-competing local goods.

    To be consistent with GATT principles the BTA would have to follow the principle of non-discrimination. One way of doing this would be to assess the carbon-intensity of the incoming goods and levy only what was required to make the said goods no more carbon-intensive than the traded goods with which these were competing.

    This demolishes the arguments about fugitive emissions. One could then use the money raised to assist the country hit by the BTA to lower their carbon-intensity — perhaps funding improvements in their energy, transport or other infrastructure or perhaps even buying up assets and bringing in changes.

    That’s a hugely different proposition than free permits.

    It is largely a furphy though. Aluminium smelting for example — one of the big winners under the Rudd’s Pollution Rewards scheme, is not only heavily subsidised already here but is amongst the dirtiest in the world.

    The turth of the matter is that the will to introduce an adequate scheme or even a transitional one to a minimal scheme was never there. What this ugly episode showed was that the Greenhouse Mafia wwre in charge of both major parties. As you will recall, the Greenhouse Advisory Group set up by Howard and utterly dominated by big filth was inherited by Rudd and left almost completely unchanged (they added a wave power person for cosmetic reasons).

    The sad thing is that Rudd could, if he had wanted, have put up a scheme and forced it through in August of 2009, as the Liberals would have pleaded nolo contendere or faced a wipe out in a double dissolution. It was the ineptitude and bad faith of Rudd and his rightwing gang of apparatchiks that lies at the heart of the debacle we now see being played out.

    Looking at the farcical process by which Rudd and Turnbull ensured that there would be no progress on this matter and its final passages in the coming election reminds me a lot of “Gloria Clemente” from White Men Can’t Jump. It seemed that when the CPRS fell over, almost everyone got what they wanted. A bad schem had been blocked. The polluters weren’t going to be paid but they would continue to dump for free. The Liberals had a leader they liked. Rudd didn’t have to deliver on his promise. It seemed like the Liberals had cast aside the next election …

    Sometimes when you win, you really lose, and sometimes when you lose, you really win, and sometimes when you win or lose, you actually tie, and sometimes when you tie, you actually win or lose. Winning or losing is all one organic mechanism, from which one extracts what one needs

  33. Hermit
    August 1st, 2010 at 17:29 | #33

    I think Australia could get away with imposing a carbon export levy on coal and LNG if we have a compatible domestic scheme. Reason being that we are by a country mile the world’s No.1 coal exporter and may eventually place second behind Qatar for LNG exports. Buyers might have real difficulty getting the amounts they need from alternative politically stable suppliers. If Japan’s steel industry for example sourced all its coking coal from South Africa it might be a tad awkward as the ships of shame snuck around the Australian coast.

    If they can do it for cigarette packets I think we could even include a message. The tax invoice could read ‘Forgotten something? Under the Kyoto protocol we all promised to burn less fossil fuel. This tax invoice is to remind you of that decision.’ At $10 a tonne of CO2 the levy would be about $24 a tonne on thermal coal (FOB price ~$100) , $26 on coking coal (on $200) and $13 a tonne on LNG ($400).

    Rather than all the hassle of calculating carbon embodied in imports of finished goods (eg steel ingot, outsourced call centre services) we would simply levy fossil fuel exports and let the finished goods come back in without additional charges. It could mean that goods from China used electricity made from Indonesian coal instead of our coal. We’ll find some other way to remind the Indonesians they aren’t helping. The Chinese could ask for a refund of the levy if they promise to spend it on green tech and we will be mercifully spared the farce of carbon credits. This approach is administratively simpler and enables Australia to be a leader not a follower for once.

  34. silkworm
    August 2nd, 2010 at 01:46 | #34

    The real problem, as some have noted, is US selfishness. There’s a way to deal with that. The rest of the world can gang up against them by instituting a global price on carbon and penalizing the US through trade sanctions and tariffs until it comes around. The question is, what country is going to provide the leadership to do this. Certainly leadership is not going to come from Australia, because Australia is too cosy with the US, and the rest of the world knows it.

  35. Ken Fabos
    August 2nd, 2010 at 09:23 | #35

    I wonder how much of the drop in public concern for climate change is affected by large areas of Eastern Australia temporarily coming out of drought; around here it’s green, the dams are full, the mild winter conditions are generally more welcome than hard frosts and prospects for upcoming catastrophic fires seem much reduced compared to even a year ago. That the same mild winter were it dry, would greatly limit the opportunities for safe hazard reduction fires and be setting the stage for more Black Saturday’s is, right now, not a real consideration.
    Meanwhile the opponents of action on climate trot out the same old arguments – highlighting short term costs of serious action but assiduously downplaying or outright denying long term costs that come with failure to act being most popular – that and promoting the view that coal miner’s jobs must have priority over and are innately superior to solar farm construction jobs or pretending the decisions of the world’s biggest exporter of coal and highest per capita emitters are inconsequential, or pretending the current political aversion here and globally to action can somehow be permanently sustained against the inexorable growth of real world consequences and impacts. And sharp growth in direct economic costs. It disturbs me that as those costs rise, the urge to expediency could well see ever more short term ‘economic’ responses that are inconsistent with the requirement to reduce emissions and add to rather than reduce the further future costs. More coal plants to power more air conditioners for the heat waves that will come seems like the policy responses of politicians who are brain dead.

  36. August 2nd, 2010 at 11:02 | #36

    @Hermit

    I think Australia could get away with imposing a carbon export levy on coal and LNG if we have a compatible domestic scheme.

    We absolutely could and in a way this highlights the absurdity of claims that high taxation of Australia’s mineral resources would ‘cost jobs”. In fact, in almost any conceivable scenario in which China’s economy doesn’t either collapse (or resort much more significantly to that other unmentionable low carbon technology) coal imports to China will continue to escalate forcing up the price. Removing fuel subsidies and tax detectability of dirty energy would be a start. Placing an export levy would also be good.

    From the 1st Quarter 2009 to the 1st Quarter 2010 Chinese coal consumption grew by 28.1%. It’s currently tracking consumption of 3 billion metric tonnes per annum, but at 7-8% growth the energy required to sustain this will force this figure up by about that amount even if growth in supply from all other energy sources increases at the same rate, which is extremely optimistic. After coal (about 80% of stationary energy, oil is next and thereafter the remainder are in small single figures led by hydro). Drought is putting pressure on hydro and so one has to wonder about the longterm capacity of hydro to grow at this rate. We know that oil is finite too.

    Anyhow, let’s be conservative and say that China’s stationary energy demand only doubles once every 10 years. That means by 2020 it is using 6 billion metric tons per year and by 2030 12 billion … What this means is that Chinese coal consumption (already three times that of the US) grows by three times current US coal consumption by 2020, roughly six times that in the following ten years etc … with all the mining rail, and port infrastructure that implies. Even assuming the World Coal Institute’s assumption about Chinese RAR coal is right, (about $110billion metric tonnes) it will (assuming 7% growth pa) by 2030 have consumed about 20% of the total reserve. Of course, China is also a coal exporter. Its exports are in addition to these figures.

    China will import something like 150 million tons of coal this year (about 5% of its usage but 60% of Australia’s coal exports). If they double their imports — which is possible, Australia simply won’t be able to meet the demand, at least without lots of new coal transport facilities. The limiting factor on growth is not going to be taxation of coal but capacity constraints on the system. Even if Australia were to push up the price of its coal, Chinese demand will still be greater than we can supply. They have to keep buying, and one suspects other suppliers are not going to undercut us — why would they? India’s economy is just as dependent on coal as China’s and they also want to grow their economy by 7% pa … and although they are only consuming about 1/6th of China’s current consumption, they too are going to be in much the same position.

    Even if no price is attached to carbon, it is hard to escape the conclusion that the price of oil will continue to escalate as the best sources are tapped out, and since diesel fuel is also key to coal extraction (and composes such a significant portion of Chinese energy supply) this too will place upward pressure on coal prices everywhere. Given that no country can be without energy supply and almost all industrial supply is from coal, one has to imagine that many countries are going to start placing restraints of one kind or another on exports of coal either in the form of caps or levies. So really, getting in early and effectively doing this makes perfect sense from Australia’s POV. In the much longer run escalating prices, (and dwindling water supplies) will cut Chinese demand but in the short to medium term (5-15 years), this (along with LNG) will be a seller’s market.

    Why give the stuff away cheap?

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