I’ll be talking on this topic to the Victorian Transport Economic Forum on Wednesday, 10 February 2016 from 5pm at the Public Transport Victoria Corporate Centre, 750 Collins Street, Docklands. I’m still formulating my thoughts, so I’ll be happy to read those of anyone who’d like to comment. Here are a few observations to get started

* The process of decarbonizing electricity supply is well under way and, I think, just about unstoppable. To some extent at least, this process provides a template for an approach to transport. In particular, there’s a close analogy between cars and coal. Both have negative local effects (air pollution, congestion, negative amenity and so on) that haven’t been properly taken into account, in addition to generating CO2 emissions. Focusing on the local effects may be a more effective way of reducing CO2 emissions than attacking the problem directly

* By contrast, although we have the technology to greatly reduce the use of carbon-based fuels in transport, we haven’t made nearly enough progress, and it’s not clear what is the best way to go. Should the focus be on improving existing modes of transport (for example, with electric cars), or in switching modes (public transport instead of private) or in reducing the need for travel (with urban design, telepresence and so on).

* Relatedly, is it better to rely on prices, direct controls such as vehicle fuel efficiency standards, or on some other approach?

The agreement just announced from the Climate Conference in Paris isn’t by any means, a solution to the problem of avoiding climate change. But, along with other developments over the past year, it signals the fact that the world community has turned the corner on this issue. Barring a catastrophe[^1], the world is now on the path to near-complete decarbonization of the economy by the middle of this century, and to stabilization of the global climate with less than 2 degrees of warming.

The big developments of the past year include:

* An apparent (though small) decline in global CO2 emissions in 2015

* Peak Coal. Not only has global consumption of coal begun to fall, but the pressure to abandon coal, exerted at every stage from the initial financing of mines to the burning of coal in power stations has grown in intensity.

* Continued progress in renewables, notably including the appearance of commercially viable battery storage systems. It’s now obvious that, taking all the costs into account, renewable electricity is cheaper than the fossil fuel alternatives, and capable of completely replacing them.

* The political eclipse of leading denialists, most notably Abbott and Harper, and the disarray of US Republicans on the issue

* Looking at the agreement itself, it’s as ambitious as could reasonably have been hoped. Big points include
– The adoption of 1.5 degrees as a goal towards which efforts will be aimed
– The “ratchet” mechanism of 5 year reviews
– The acceptance that all countries need to act to reduce emissions over time.

Taken together, these developments put the world on a path to steadily more ambitious reductions in greenhouse gas emissions, consistent with stabilization of the global climate at 2 degrees of warming or less.

[^1]: The most obvious possible catastrophe would be a Republican victory in the 2016 US elections. But the momentum for change is such that even four years of unified Republican rule would probably not be enough to stop it.

For quite some time, I’ve argued that, if nuclear power is to make any substantial contribution to reducing CO2 emissions, its growth will have to accelerate in China and to be based on the AP1000, the only Gen III+ design likely to be built in numbers significant enough to achieve any kind of scale economy.

It now appears highly unlikely that this will happen. Although China notionally restarted its nuclear program in 2012, a year after Fukushima, approvals have slowed to a crawl. This article, from Nuclear Engineering International, explains some of the reasons.

More significantly, China appears to have abandoned the idea of using a Western design, and is instead pushing two designs of its own, the CAP-1400 (an adaptation of the AP1000) and Hualong 1, Chinese design with French antecedents, variously rated as Gen II, Gen II+ and “comparable to a Generation III”.

It appears that the cost of imported inputs to the current projects is seen as prohibitive. The hope that the Hualong will generate an export market, and the British government has just agreed in principle to the construction of one such plant, conditional on approval of the design. In the absence of any operational plants, that looks problematic, to put it mildly. The announcement looks to be driven more by diplomatic considerations than by economics, which suggests that actual construction may be a long way off.

The announcement that the UK government is cancelling funding (budgeted at stg 1 billion) for its proposed competition for carbon capture and storage (CCS) marks the end of the last best hope that we can mitigate CO2 emissions while continuing to burn coal. If follows the abandonment of similar programs in Australia and the US.

Two thoughts on this.

First, it makes a nonsense of one of the justifications for supercritical coal-fired power stations, namely that they can be made “CCS-ready”.

Second, lots of projected paths to decarbonization involve substantial reliance on CCS. Those will need to be scrapped or changed substantially. The simplest change would be to replace coal+CCS with nuclear (the UK government now seems to be chasing the mirage of Small Modular Reactors) but that is only marginally less unrealistic than CCS (a new post on this shortly, I hope). The alternative is to rely on a combination of storage and smart grid pricing to adapt our current electricity system to one driven mostly by wind and solar PV, with hydro and limited amounts of gas as the dispatchable sources.

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.

I have a piece in The Guardian, pointing out that the moral case for coal only works after you’ve ruled out, for amoral reasons of self-interest, the genuinely moral options for helping poor countries and saving the planet.

Along with 60 other Australians, mostly more eminent than me, I’ve signed an open letter to world leaders calling for a moratorium on new coal mines and coal mine expansions. The letter focuses particularly on Adani’s proposed Carmichael mine but it’s important to be clear that this is part of a global movement to stop new coal mines everywhere in the world.

The underlying reasoning isn’t spelt out but ought to be clear enough. If we are to stabilize greenhouse gas concentrations at 450 ppm or below, as the world’s leaders have already agreed we should, it is necessary for carbon dioxide emissions to peak soon, and decline to zero over the next 30 years or so. Given that burning coal creates major health hazards in addition to C02 emissions, coal burning needs to eliminated even more rapidly. That means first, that no new coal mine can expect to work for an operating life of more than 30 years, and second that any new coal mine must be offset be additional closures of existing coal mines. Once these factors are taken into account, it’s essentially impossible for new coal mines to make economic sense within the constraints imposed by a limited carbon budget. Certainly, that’s the case for Carmichael, which is a massive boondoggle keeping alive only in the hope of extracting some form of government assistance or compensation.

I have a piece in The Economist climate blog, making the point that the risk of catastrophic climate change has been ignored by “lukewarmists” like Bjorn Lomborg and Jim Manzi.