A global climate deal without Australia

Over the last few weeks, there have been quite a few reports that the US, Japan, Australia and Korea are negotiating an agreement that would greatly reduce the availability of concessional funding for new coal projects. Recent reports, though, suggest that the US and Japan will make an agreement on their owmsn ter, leaving Australia (and perhaps also Korea) to go its own way. That has some pretty big implications for the Turnbull government and its position at the Paris Conference.

National and international development banks and export credit agencies, including Export-Import Banks in (South) Korea and the US, the Japanese Bank for International Cooperation[1] and the Export Finance Insurance Corporation in Australia have been a major source of finance for coal plants in developing countries like the Phillipines and Vietnam. With Chinese coal demand having peaked, and India shifting emphasis to renewables, the coal industry is counting on rapid demand growth in countries like these.

The reported US-Japan deal would eliminate funding for coal-plants that don’t use supercritical technology, and would require ultra-supercritical technology for all but the poorest countries.[2] Apparently, Korea has proposed weaker restrictions, and Australia weaker still. But rather than split the difference, Politico reports that the US and Japan will make a deal without Australia and Korea.

As far as I can tell, we are still in the stage of preliminary posturing. Some sort of compromise, or perhaps capitulation, may be reached. But if the US-Japan deal goes ahead without us, that will be a pretty clear signal that Turnbull is going to stick with Abbott’s anti-climate policies.

If such an outcome is possible in these talks, it’s also possible in Paris. Until now, I’ve assumed that the imperative for a global deal is such that even Australia’s weak proposals, and rejection of any credible policy, will be treated as acceptable. But now that Harper is gone in Canada, and Japan is working with the US, Australia is unlikely to find much backing for a recalcitrant position. While Korea might hold out on export financing, it is unlikely to want to be seen as sabotaging the entire agreement.

Hopefully, this is one of those situations where the export finance negotiations are still on a dynamic set under Abbott. Hopefully, Turnbull can see that the merits of being a global citizen in good standing, notably including continued friendly relations with Obama, outweigh any grumbles he might face from the LNP right.

Update An agreement has been reached. It looks pretty close to capitulation by Australia, though the government extracted enough concessions to call it a compromise. (Hat Tip: Cambo in comments).

fn1. I wasn’t clear about Australia’s involvement, since we don’t export or finance power plants, AFAICT. It appears that the agreement was formally made by the OECD, which requires unanimity. That makes the threat by the US and Japan to go it alone even more significant, I think.
fn2. Despite the impressive sounding name, ultra-supercritical plants still emit a lot of CO2, only about 10 per cent less than the subcritical plants they replace.

25 thoughts on “A global climate deal without Australia

  1. While supercritical and ultra-supercritical coal plants don’t do much to lower emissions, requiring the technology is still helpful, as they are more expensive to build, increase construction times, and can offer more opportunities for corruption and blow outs in construction costs. Currently it doesn’t really make economic sense to build coal power plants anywhere since even if renewables aren’t cheaper in an area now, they are likely to be before a new coal power station can come online, so even small increases in the cost of coal power plants can result in them not being built at all.

    While a complete ban on financing any kind of coal power would be better, I’ll be glad to see any improvement at all.

    Of course, if a proper accounting was made of the costs resulting from toxins released by coal plants and environmental damage, no new coal plants would ever be built.

  2. Pr Quiggin, I’m not sure friendly relations with Obama figure much into LNP priorities – seems to me more like they hold views similar to US Republicans; ie Obama doesn’t have long to go before his Presidency ends, is not an adult/sensible/legitimate leader of the US and Congress, by doing all it can to thwart him is admirable as well as more to their taste.

    Not sure how far Turnbull can take his previously stated convictions on climate without provoking the Right. He’s certainly been comfortable with the coal sector’s/LNP’s current PR line since taking over – our coal will lift people out of poverty, is ‘cleaner’ than other nation’s coal and they’d just buy from someone else anyway. It looks like that was the deal – he learned his lesson that being proactive on climate is incompatible with being PM of Australia. It may not sit comfortably but if obstructing a strong international commitment on climate is what it takes to stay PM I’m beginning to think that’s what he will do. Perhaps some statement of intention to do something in some far off future will be an acceptable compromise within the LNP. I’d very much like to be wrong and see him force the LNP’s hand on this.

    BTW are there any Libs or Nats besides himself that has ever showed themselves willing to speak out in favour of climate science and most or more climate action rather than least or less?

  3. The only consolation I can take is this. Situations which seem likely to drag on intractably and interminably have been known to suddenly change and resolve. There appears little hope that the Turnbull led Liberals will do anything sensible on this matter. We just have to hope that something rapidly comes out of left field and radically changes the game. Maybe we will get to the stage where global economic sanctions are imposed on recalcitrant coal economies like Australia. Wouldn’t there be some coal-pigs squealing if we were thrown into the same sanction pot as Iran and Russia?

    Is our economy better for being “fed” coal or can it be fed some other “meal” (energy type)? In the annals of obscure and unlikely science experiments this one might take the cake… or is that coke?



  4. What are we to make of the Republican Party? Surely if they take power in 2016, then that will scuttle any climate deal agreed upon in the interim.

  5. @Robert

    I don’t know. I think we have entered upon an era where the systems (political, economic and climate) are all becoming less stable. Wild perturbations and fluctuations are becoming more common. In terms of voting, people seem to be rushing or flip-flopping from one mainstream party to the other and then back again. The people want solutions to all of the burgeoning problems, societal and environmental. The people still subscribe to the standard wisdom that one of the major parties can provide the solutions. The reality is that neither mainstream party in any Western country can provide solutions, at least not without radically changing their platform.

  6. @Robert
    The state of the Republican Party, as evidenced by the candidates they are putting forward, is certainly disturbing, as is the prospect that they might actually win the presidency in 2016.

  7. @ Ronald Brak

    requiring the technology is still helpful, as they are more expensive to build, increase construction times, and can offer more opportunities for corruption and blow outs in construction costs

    I appreciate dry wit.

  8. With the softening global demand for thermal coal and the collapsing price, how likely is it that a branch of the Australian government will underwrite hundreds or thousands of millions of dollars worth of increasingly risky investments in foreign coal plants?

    I’d dig for the information myself, but past experience with other countries’ export financing banks has taught me that useful information is very hard to come by unless you already know exactly what you are looking for and where to find it.

  9. The last time I went searching for something to read about supercritical boiler technology I got the distinct impression that while there were a few plants constructed, they were not operating in the supercritical (let alone the ultra->) domain – with reasons given such as longevity and maintenance issues due to metallurgical constraints.

    Maybe the problem is with my comprehension but it seems the added complexity isn’t worth the efficiency – maybe with some kind of price on emissions that might change.

    I’d love it if someone could point me at a good source to the contrary.

  10. If Andrew Robb is at the gig, then we’ll know the LNP want to sink any global deal which penalises coal production and consumption. Quite frankly, I have zero trust in the LNP on this issue, no matter which of them is in the PM’s seat. There is serious widespread resistance to anything to do with climate change in the core of the LNP, and they have a powerful say in what transpires. It would be fantastic if they prove my distrust to be ill-founded.

  11. The question is what WILL change Australia’s stance? Of their own will and by platform intention, it’s not the Liberal Party and it’s not the Labor Party. It’s also not the Greens who currently have no foreseeable chance of ever forming a government.

    I can only see outside forces forcing Australia into line. The forces will be international economics or economic sanctions. Which will it be Australia? Your choice. Eventually one of the parties, in government during the crucial or crisis period of this issue, will have to bow to global economics or economic sanctions.

  12. Hopefully, Turnbull can see that the merits of being a global citizen in good standing, notably including continued friendly relations with Obama, outweigh any grumbles he might face from the LNP right.

    The fact that the Turnbull government is pushing ahead with its anti-environmental amendments to the Environment Protection and Biodiversity Conservation Act isn’t too encouraging on that front.

  13. Happy Heyoka, that’s about right. From the point of view of a power company, supercritical coal plants only make sense when coal is very expensive. Supercritical plants operate and higher temperatures and pressures than standard coal plants and so want to blow up more. To prevent the high temperature/pressure parts from blowing up, more expensive materials along with strict, more costly maintenance are required. So if coal is cheap, as it is now, or comes from a stranded and therefore very cheap source, it must be tempting to just run the plant as a normal coal plant and let emissions be 12% higher or whatever it would be depending on the specific plant. And that’s probably what would happen in Australia since there’s no carbon price. How to stop supercritical and ultra-supercritical plants being run as normal coal plants in the absence of a carbon price when coal is cheap I don’t know. Make them pay for 20 years parts and maintenance up front?

    And of course if coal is very expensive, there is not point in building a coal plant, so it very catch-22.

  14. @Cambo

    Interesting development. The clear implication is that Malcolm was leant on by much more powerful figures, one being Obama, representing much more powerful interests. What instrument(s) did these figures indicate would be used if up front compliance was not agreed? The instruments would have to be trade negotiation pressure and/or targeted sanctions relating to coal. These people play hardball. There would have been no nice “please” just a really friendly statement delivered with a smile, “Agree or face sanctions X,Y and Zee. Thanks Malcolm, I knew you were a reasonable fellow, sign here.”

  15. The Westphalian rule of unanimity in classical international organisations and negotiations, including the UN climate process, is inherently more porous than many think. It’s true that standard international agreements only bind states with their consent. But try to leverage this rule into a veto, and the holdout state just finds that everybody else just convene in the next room and make their agreement without you. A tough chair like Laurent Fabius can use this to steamroller minor delegations like Australia’s. Realpolitik wins out: a worthwhile deal has to include the USA, China, and the EU, plus a good number of others, but nobody else us indispensable.

  16. I wonder if Poland tried to veto the EU position on this? They love coal even more than we do.

  17. @James Wimberley

    Correct. It’s about time we accepted some realism as in realpolitik. USA, China, EU and Russia rule the world. India maybe gets a little look in. We can’t be the nail that stand outs. “The nail that stands out gets hammered.”

  18. @Cambo

    Yes and that demonstrates clearly that despite all the hot-air nothing will be done to address CO2 emissions until the effects are so bad that sufficient political will emerges by when it will be far far too late.

    The die is cast – science says.

    And just as another example – here is a typical capitalist developer getting a green light to develop hundreds of acres of woodland into residential lots near Port Macquarie.

    This will result in more deforestation and worsening of the global carbon budget. Local governments and State governments have absolutely no intention (and never will) of developing low carbon footprint policies.

    A key driver is artifical population growth – good for short-term capitalists – catastrophic for humanity.

    The reduction in Australian woodland for the sake of new residential and commercial sites makes a mockery of all those present carbon-offset programs based on planting trees.

    We are now at 400 ppm and will soon be at 450 ppm and over 500 in the not to distant future.

    Not even the Greens are across this issue.

  19. @Ikonoclast
    This deal was ‘ordered’ or ‘done’ by way of the OECD at a meeting in Paris attended by Resources Minister Josh Friedenberg. No comment from him in the SMH piece but there is from the Trade Minister. Sure Turnbull would have agreed to it and I assume a full Cabinet pass prior. The Obama – Turnbull scenario could have just as likely been Malcolm begging Barack to put the squeeze on him. Or us. Whatever, a good move.

  20. Relevant linkage between population and CO2 is here

    You can’t say we didn’t know about it at least 5 years ago.

    Just make your own projections and see what is in store for humanity.

    You don’t have to guess – there is sufficient science.

  21. @Ivor

    I agree. It is very concerning that we are on the “too little too late” trajectory when it comes to dealing with climate change.

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