That’s the headline for my latest piece in The Conversation. Read there, comment here.
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That’s the headline for my latest piece in The Conversation. Read there, comment here.
John Quiggin 
Well, I guess it’s obvious where my call is going to fall here. The change is meaningless for climate change. Too little, too late and all the assets are going to continue emitting GHGs anyway. This is another thing capitalism and its state subsidizers and enablers do when they pretend to be doing something and intend to do nothing.
In 2017, “Global fossil fuel subsidies reach $5.2 trillion, and $29 billion in Australia”. – Renew.
“The working paper prepared by the IMF Fiscal Affairs Department estimated that, in 2017, global fossil fuel subsidies grew to $5.2 trillion, representing 6.5 per cent of combined global GDP.
China leads all countries in the level of subsidies provided to fossil fuels, which the IMF report estimated to total $1.4 trillion in 2015. The United States followed with $649 billion in subsidies, Russia with $551 billion and the EU with $289 billion.” – Renew.
“The fossil fuel industry currently gets a range of assistance, including tax breaks for drilling costs and tax deductions for if their reserve of resources falls in value over time. Last year, the industry got further tax code breaks due to the Covid-19 pandemic – a financial boost that did not stop many of them shedding tens of thousands of jobs.
This direct and indirect help can be added up in different ways but, globally, the International Monetary Fund has said that such subsidies total more than $5tn a year if the cost of the pollution freely emitted is also considered. – Guardian 23/4/2021
“It is the year 2021. The fact we are still having this discussion and even more that we are still subsidizing fossil fuels using taxpayer money is a disgrace,” said the 18-year-old (Greta Thunberg). “It’s clear proof that we have not understood the climate emergency at all.” – Guardian 23/4/2021
These government subsidized “market trades” are just shuffling deckchairs on the Titanic. Nothing substantive is being done, even at this late stage. Almost everybody intends to burn fossil fuels full bore to 2050 and beyond, no matter what they claim. I don’t believe a word any of them say or write. Only global economic collapse brought on by global climate and ecological collapse will stop them. And it will stop them… soon.
The now largest mining company in the world, after its merger with Billiton Pic in 2001, BHP out in 1885 as a very small company. Its first mine had reserves of silver, lead and zinc. Since then BHP has extracted $100 billion worth of minerals. But it was its steelworks that made it famous in the 1930s. In 2001 BHP Pty Ltd merged with the South African mining company called Billiton Pic. The merged mining conglomerate has become the largest mining company in the world. It got out of steel making by spinning off its heavy industrial assets. Ever since the Hawke ALP government brought in World Price Parity for oil sold in Australia, BHP has benefited from its Bass Strait oil joint venture with Esso Australia. But in 2020 BHP earned less then ten percent of its revenue from its petroleum assets. Iron ore assets alone gave BHP almost half of its revenue in 2020. In 2020 BHP operated nine metallurgical coal mines in the Bowen basin in Queensland. Mike Henry, its CEO, seems to be returning BHP back to focusing on its core mining business assets..
I agree with I’ll to the extent that JQ’s piece, sound as far as it goes, lacks an argument why pure- play oil and gas companies will be weaker to resist market and political pressures to shrink. It’s not too hard to make. One: cost of capital goes up, steadily raising the bar for new investment. Two: the practitioners become increasingly shady, from ethically challenged Adani to outright crooks like the American coal grifter Jeff Hoops. Investors who care for their reputations will run even farther, and political adversaries are emboldened. The feedback loops are positive, and the social license to operate can die quite quickly.
James, I thought both arguments were there, but maybe I needed to spell them out a bit more.
Capacity charge seems to negate any benefits of divestment, if there are any. The government is now insurer, funder, protector and enforcer. How much to buy & close?
Capacity charge for coal & gas is a furphy and a boondoggle at National Cabinet & Ministerial level, the ultimate pork barrel.
James said “Two: the practitioners become increasingly shady”
– except it seems to be shady politicians.
Ikon said “This is another thing capitalism and its state subsidizers and enablers do when they pretend to be doing something and intend to do nothing.”
– Greater than a carbon price from your pocket to the worst co2 generators.
JQ said “For now, “pure play” oil, gas and coal companies can continue to generate profits.”
– Aided and abetted by…
– The Energy Ministers say “”These reforms will ensure an affordable and reliable energy system that will support job creation and economic growth to benefit consumers.”
[Nice touch] “A sub-committee of the National Cabinet, © Copyright 2021 Commonwealth of Australia”
IEEFA says ““Even at the lower end of capacity prices paid in the West Australian market, the cost on power bills would still be 21% greater than the carbon cost faced by Queenslanders, 30% higher for South Australians, 41% greater for New South Wales households, and 62% higher for Victorians.”
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“ENCRC and EMM are chaired by the Honourable Minister for Energy and Emissions Reduction, Angus Taylor.
[What could go wrong?!]
“Energy Ministers work closely with Energy Consumers Australia, and have oversight of the following energy market institutions responsible for the operation of national energy markets:
– The Energy Security Board (ESB)—whole of system oversight through transition
– the Australian Energy Market Commission (AEMC)—the rule maker and market development adviser
– the Australian Energy Market Operator (AEMO)—the system operator
– the Australian Energy Regulator (AER)—the economic regulator and rule enforcer. ”
“Priorities
As a sub-committee of the National Cabinet, ENCRC have been tasked with the following key priorities to deliver in 2021:
– “immediate measures to ensure reliability and security of the electricity grid ahead of the 2020-21 summer
– the redesign of the National Electricity Market to take effect after 2025
‘ a package reforms to unlock new gas supply, improve competition in the market and better regulate pipelines
“These reforms will ensure an affordable and reliable energy system that will support job creation and economic growth to benefit consumers.”
https://energyministers.gov.au/about-us/our-role
[Ikon et al, this group may make you write – alot.]
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“Household power bills could jump if ageing power plants are paid to remain open, report warns
…
“The Institute for Energy Economics and Financial Analysis (IEEFA), and Green Energy Markets, have released a report warning households could face power bills of $182 to $430 more a year if a new proposal goes ahead.
“They say those charges would far exceed the impact of the carbon price on power bills.
“Their report criticises a proposal by the Energy Security Board (ESB) to introduce a “capacity payment” to the National Electricity Market.”…
https://mobile.abc.net.au/news/2021-08-20/household-power-bills-could-jump-if-capacity-payments-introduced/100391958
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The Institute for Energy Economics and Financial Analysis (IEEFA)
“Households may soon face a new charge on their power bills
“The Energy Security Board (ESB), with the backing of Australia’s Federal Energy Minister, wants electricity consumers in the national electricity market (the “NEM”) to start paying capacity payments to generators.
“Johanna Bowyer, report co-author and IEEFA electricity analyst says under the scheme, electricity consumers would pay power plants not just for the electricity they actually generate, but also for the size of capacity installed in the power plant, irrespective of how often it might be needed.
“The ESB’s new proposal will require electricity consumers to pay primarily conventional generators such as coal and gas plants for what they could produce if the plant was operating at its full level of capacity, regardless of whether or not, or how often, the generator uses all of its capacity to produce electricity,” says Bowyer.
“According to the ESB and Federal Energy Minister Angus Taylor, this new payment is necessary because many coal-fired power stations are becoming financially unviable and if they were to exit suddenly, it could lead to blackouts.
“Our analysis finds that reliability is not at threat by the level of likely coal power plant exits.
“All states across the NEM have enough power capacity for the next decade
“There are also thousands of megawatts of further battery projects in development which could be committed to construction if required.
“By way of comparison, the cost increase faced by New South Wales, Victorian and Queensland consumers from the carbon price was between $112 to $150.
“Based on the Western Australian capacity payment experience, consumers could be facing a new charge which is potentially more than double that of the carbon price.
“Even at the lower end of capacity prices paid in the West Australian market, the cost on power bills would still be 21% greater than the carbon cost faced by Queenslanders, 30% higher for South Australians, 41% greater for New South Wales households, and 62% higher for Victorians.”
“Read the report: Energy Security Board’s Capacity Payment: Burden on Households – Capacity Payment Primarily to Fossil Fuel Generators Could Be More Than Double the Cost of the Carbon Price”
Click to access ESB-Proposal-to-Require-Consumers-to-Pay-Generators-a-Capacity-Payment_August-2021.pdf
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I could not find out who are the “Senior Committee of Officials”. A worrying sign.
Google says “Your search – energyministers.gov.au “senior committee of officials” SOC – did not match any documents.
John: your piece covered reputation at length but left out the outright crooks, who I suspect are more important for social license than their economic share of the market might suggest. The cost of capital issue maybe deserves a more formal treatment than either of us gave it.