CCS: A fiction that has outlived its usefulness

John Quiggin41 Comments

With only a handful of pilot projects in operation around the world, Carbon Capture and Storage (CCS) has not played a significant role in reducing carbon dioxide emissions. CCS has, however, been valuable as a fiction for all those who want, for whatever reason, to avoid dealing explicitly with the fact that stabilizing the global climate will require ending the use of fossil fuels, and particularly coal. For example, rather than prohibiting new coal-fired power stations, the US EPA has proposed that only power stations equipped with CCS technology should be permitted. Since new coal stations are mostly uneconomic even without CCS, this amounts to a ban, but can be justified simply as requiring best practice.

It now appears that this fiction has outlived its usefulness. Recent reports suggest that the EPA will drop the CCS requirement in favour of the weaker requirement that all new coal-fired stations should use supercritical combustion. There are two main reasons for this

(a) The requirement might not stand up to legal challenge on the basis that CCS is not a feasible technology
(b) No new coal plants are likely to be built anyway

Meanwhile, the EU is struggling over proposals to stop subsidies for coal-fired power. Again, the compromise was to subsidise only projects with CCS. But the coal lobby is now arguing that

proposed requirements on carbon capture and storage (CCS) to neutralise emissions have to be realistic as the technology is still in its infancy.

In this context, “realistic” means supercritical and therefore theoretically ready for CCS, as opposed to actually using the technology.

Combine this with a string of cuts in funding for CCS projects, and the conclusion is inescapable. CCS is an ex-parrot.

The socialist objective

John Quiggin55 Comments

There’s a push within the ALP to remove the party’s long-standing socialist objective, which states

The Australian Labor Party is a democratic socialist party and has the objective of the democratic socialisation of industry, production, distribution and exchange, to the extent necessary to eliminate exploitation and other anti-social features in these fields.

Then follows a long list of commitments, notably including
(i) the restoration and maintenance of full employment;
(j) the abolition of poverty, and the achievement of greater equality in the distribution of income, wealth and opportunity; and
(k) social justice and equality for individuals, the family and all social units, and the elimination of exploitation in the home

I’m ambivalent about this, both as as regards substance and timing. When I started this blog, I made the decision to describe myself as a social democrat rather than a democratic socialist. In 2006, I gave the following explanation, in a comment

I prefer “social democratic” because it clearly refers to the set of policies implemented and advocated by social democrats in the second half of the 20th century, including a mixed economy, an active welfare state, government responsibility for full employment and so on.

By contrast, socialism is less well defined. It can mean comprehensive public ownership, which I don’t support, or it can be just a general statement of values and aspirations, consistent with social democracy.

So, if the change was simply to replace “democratic socialist” with “social democratic”, and to give a description of goals consistent with that, I’d have no problem. But let’s look at the text proposed by NSW Labor Leader Luke Foley[1]

The Australian Labor Party has as its objective the achievement of a just and equitable society where every person has the opportunity to realise their potential.

“We believe in an active role for government, and the operation of competitive markets, in order to create opportunities for all Australians, so that every person will have the freedom to pursue their wellbeing, in co-operation with their fellow citizens, free from exploitation and discrimination”.

Foley’s further comments make no reference to full employment, equality, poverty or any other social democratic concerns. He goes on to say

We understand that competitive markets are best placed to deliver the economic growth that the people we represent rely on.

We also know that regulation and redistribution are necessary to correct market failures, to ensure dignity and opportunity for all Australians.

Is there anything here that Tony Abbott, or even Joe Hockey, could disagree with?

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Demography and irreligion

John Quiggin11 Comments

A few months ago, I was a bit surprised to read a report put out by the Pew Research Center predicting that the proportion of the world population without a religious affiliation would decline sharply by 2050. The basic argument sounds plausible: an increase in the unaffiliated proportion of the population within countries will be more than offset by faster population growth in countries with higher rates of affiliation. The main points are presented in a peer-reviewed article in the journal Demographic Research, which suggests the analysis should be solid.

Still, I thought I would dig a bit, and found a longer version of the report here, including the projection that Christians would decline from 78.3 per cent of the US population in 2010 to 66.4 per cent in 2050. That seemed like a very slow rate of change, so I did some amateur demography of my own. I found another Pew report, released almost at the same time, which focused on the beliefs of Millennials (those born from 1981 onwards). This report showed that less than 60 per cent of Millennials currently report a Christian religious affiliation, compared to around 70 per cent of X-ers (born 1965 onwards) and much higher levels for older cohorts.
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Back to the Deutschmark

John Quiggin86 Comments

The debt crisis has upended lots of my assumptions about European politics, so it’s perhaps not surprising that I find myself agreeing with just about everything in this piece from The Telegraph by Mehreen Khan, advocating a German exit from the euro. Less surprisingly, I also agree in general with this NY Times article by Shahin Vallee, who also concludes that the (virtually inevitable) breakup of the euro would be better achieved by an orderly German departure.
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Sandpit

John Quiggin14 Comments

A new sandpit for long side discussions, idees fixes and so on. Unless directly responding to the OP, all discussions of nuclear power, MMT and conspiracy theories should be directed to sandpits (or, if none is open, message boards).

Sea change

John Quiggin25 Comments

Maybe it’s my chronic over-optimism, but it seems to me as if there has been a sudden change in the long-sputtering debate about taxation in Australia. Until a few weeks ago, “tax reform” was, as it had long been, code a “tax mix switch” which in turn was code for “tax food and use the proceeds to cut the company tax rate or the top marginal rate of taxation”. Joe Hockey was still pushing the second part of this package only a week ago.

But the reports coming out of the recent COAG summit seemed to convey a general acceptance that more tax revenue is needed to fund health expenditure in particular. The two top options were an increase in the rate of GST or an increase in the Medicare levy, with little mention of “base broadening” (more code for taxing food).

Meanwhile, Labor has been talking about a Buffett tax, that is, a minimum rate of tax levied on gross incomes, regardless of deductions. And, while the LNP still assumes that it can win by running against a “carbon tax”, that belief seems to have come unmoored from any general theoretical viewpoint. How can Abbott run against a “great big new tax on everything”, if he is happy to discuss a 50 per cent increase in our existing “great big tax on everything”, the GST?

I’m not clear what has happened to bring this about, or whether I’m misreading the signals. But it certainly looks to me as if the great political taboo against even mentioning higher taxes has been broken.

How I learned to stop worrying and love the RET

John Quiggin22 Comments

That’s the title of a paper I wrote a while back about the Renewable Energy Target scheme. I was reminded of it when Labor announced its proposal to raise the RET to 50 per cent by 2030.

First, it’s striking to observe that no one has popped up to claim that the target is unachievable or that an electricity supply system with 50 per cent renewables will be unworkable. The strongest claim I could find in this article describing coal lobby responses is someone from the Minerals Council of Australia saying that the target is “technically questionable” which could mean anything. By contrast, until very recently, sites like Brave New Climate were full of amateur experts claiming to demonstrate the impossibility of such a goal.

Second, it’s clear that the economic impact will be minuscule. Owners of coal-fired power stations (if they are not compensated, as they should not be) will bear most of the costs. Electricity prices may rise a little compared to the current RET, but will probably be no higher than if we had stayed with a coal-based system. Perhaps this will help to convince those who think that decarbonization of the economy as a whole must have a massive cost impact, but, based on past experience, I can’t see this happening.

Third, as argued in the paper mentioned in the title, an expanded RET may not be the best way to achieve climate goals, but, if the carbon price is below the appropriate level ($50/tonne or more), a RET for the electricity sector is an appropriate policy. The main problem is that the RET doesn’t discriminate between different fossil fuels. A RET, combined with incentives to close down brown coal power stations, would have much the same effects as an adequate carbon price, and is politically much easier to do.

Leaving it in the ground

John Quiggin33 Comments

If there’s to be any chance of stabilizing the global climate, a large proportion of existing reserves of coal will need to be left in the ground. The Galilee Basin, estimated to contain 27 billion tonnes of coal, enough to raise atmospheric concentrations of CO2 by several parts per million on its own, is arguably the biggest test case in the world right now. Fortunately, the latest news is good.

The critical project is the Carmichael Mine proposed by Adani Coal. To get the coal out Adani proposed a new rail line and a port expansion at Abbot Point. Korean conglomerate POSCO (originally a steelmaker) was named as the builder of the railroad, with the prospect that POSCO would take an equity share and the Korean Export-Import Bank would lend money on favorable terms. If the rail line is built, other projects could go ahead. One such project, owned by Bandanna Coal (now in receivership) was just approved by Environment Minister Greg Hunt.

It now seems clear that Adani is mothballing the project. A month ago, the engineering design teams were told to stop work, and now Posco’s contractors have been sent home. Coincidentally or otherwise, Posco has announced the intention to return to its steelmaking roots, with aggressive cuts to its engineering and construction divisions.

Adani is still blaming regulatory delays, but this seems increasingly implausible. The sacking of the engineering teams will set the project back many months, if not years, and burning your primary equity partner doesn’t seem like a sensible response to regulatory problems. At this point, I’d say the strategy is to obtain and bank the regulatory approvals then hope that the price of coal increases in the future. This seems unlikely, given the collapse of demand in the US, declining demand in China and increasing Indian focus on renewables, in which Adani itself is a big player.

Moreover, with every year that passes, the obstacles to coal projects of any kind get bigger. Most international development banks will no longer lend to such projects, global banks are under similar pressure and institutional equity investors are being pushed to divest. It’s unlikely that the proponents of new coal projects in Australia will ever again see a government as favorable as the Abbott government, so if they can’t succeed now, they will probably never do so.