A zombie loan proposal re-emerges

John Quiggin4 Comments

2020 has not been a good year for thermal coal. Trends that were already underway have accelerated as a result of the pandemic. As the energy source with the highest marginal cost of operation coal has borne the brunt of reductions in electricity demand. As a result, planned closures have been brought forward, and new closures announced.

Financial institutions have announced ever more stringent divestiture policies, making new coal mines and coal-fired power stations increasingly uninsurable and unbankable. Insurance premiums for new and existing coal projects have risen https://www.eceee.org/all-news/news/news-2020/while-coal-premiums-soar-insurance-groups-still-supports-oil-and-gas/

National governments including tmajor coal consumers like China, South Korea and Japan have announced plans to reach zero net emissions by 2050 or 2060. Reaching this target implies a rapid end to new coal projects, and an accelerated phase out of existing ones.

It is striking, then, that emerging reports suggest that the State Bank of India might lend $1 billion to Bravus, the absurdly renamed Adani Mining, to finance its Carmichael coal and rail project in the Galilee Basin. A similar proposal, which reached the stage of a memorandum of understanding, was considered and rejected back in 2014.

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We’re all “real Australians”

John Quiggin14 Comments

That’s the title for my latest piece in Inside Story. Opening para

One of the most tired tropes in Australian politics involves identifying some part of the country (or a particular occupational or identity group) as the “real Australians” who must be catered to in order to win or retain government. In the last decade or so, we’ve been through rural and regional Australia, Western Sydney, Queensland, “tradies,” “people of faith” and probably a few I haven’t noticed.

Paying for what we used to own: The strange case of CSL

John Quiggin23 Comments

That’s the headline for my latest piece in Independent Australia. Opening paras

AS WE WAIT anxiously for the arrival of a COVID-19 vaccine, which will be made overseas, most Australians will welcome the news that a new vaccine manufacturing plant will be built in Melbourne to produce vaccines for influenza and Q fever (and possibly for future pandemics), as well as antivenenes for snake and spider bites.

The plant is the result of a deal between the Commonwealth Government and Seqirus, a subsidiary of global biopharmaceutical firm CSL. Under the deal, the Commonwealth commits to pay $1 billion over ten years for a variety of products including antivenenes.

At this point, those with long memories might recall that the “C” in CSL once stood for “Commonwealth” and that the Commonwealth Serum Laboratories began producing vaccines and antivenenes more than 100 years ago. Under public ownership, CSL developed both polyvalent antivenene against all the major Australian land snakes and the first Q fever vaccine. Why then, are we paying nearly $1 billion to a company we once owned to provide pharmaceutical products that were developed when we owned it?

Concluding para

In 30 years of privatisation in Australia, there has not been a single case where the public would not have been at least as well off if the asset had remained in public ownership. Turning this around, there is now a strong case for renationalisation of a wide range of private assets, including roads, electricity transmission and distribution network and airports. It is time to call the failed experiment of privatisation to a halt.

RCEP

John Quiggin15 Comments

For some reason, I’ve been asked to do an interview with a Korean radio station about the Regional Comprehensive Economic Partnership, frequently described as “the world’s largest trade deal”, on the basis that the countries involved have a combined population of 2.2 billion, more than any previous deal.

The most interesting thing about the deal is what’s not in it (also, who’s not in it, notably India and the United States). Early drafts followed the classic pattern, with strong Intellectual Property and Investor State Dispute Settlement, while excluding environmental and labour protections (which never had a chance in this deal) . In the final agreement, the IP content, which previously included things like a binding commitment to Plant Variety Rights has been watered down to a generic agreement that IP is a good thing, while ISDS is gone altogether.

ISDS was always an appalling way of institutionalizing[1] corporate power. But the attempt by Philip Morris to use ISDS to overturn Australia’s plain packaging laws, using a spurious corporate base in Hong Kong, seems finally to have tipped the balance against it.

Much the same can be said about strong IP. The remorseless extension of copyright, calibrated to the lifetime of Mickey Mouse, seems finally to have come to an end in the US, and any attempt to extend the scope of IP now encounters vigorous resistance.

fn1. I’m sure there is a better word to express what I mean here, that corporate power is locked in more or less irrevocably by this kind of deal. But I can’t find it in the memory bank, or the Thesaurus. Any suggestions?

Covid and the climate emergency

John Quiggin51 Comments

(Another extract from the climate chapter of my book-in-progress, Economic Consequences of the Pandemic)

The Covid-19 pandemic has accelerated a variety of social and economic trends, some beneficial and some harmful, that were already underway before 2020.

An important example of a beneficial effect has been an acceleration of the decline of carbon-based fuels. Lockdowns early in the pandemic produced a substantial reduction in demand for both electricity and transport. As well as providing a brief glimpse of a world with greatly reduced atmospheric pollution, the lockdown accelerated shifts in the energy mix that were already underway.

Since solar PV and wind plants cost nothing to operate, the reduction in electricity demand fell most severely on carbon-based fuels, particularly coal. As a result, the combined contribution of PV, wind and hydroelectricity to US energy generation surpassed that of coal for the first time in 130 years.

Official projections from the EIA suggest that coal use will return to its gradually declining trend in the wake of the pandemic, exceeding renewables for some years to come. However, the pace at which coal plants are being closed or converted to run on gas has accelerated during pandemic. Meanwhile, despite weak demand, wind and PV plants are being installed at a record pace, partly because near-zero interest rates make capital investments cheaper.

The reduction in transport usage reduced demand for oil, at one point leading to a startling situation where the price of oil was negative, as unsold oil exceed the capacity for storage. Although the price has recovered somewhat, it seems unlikely that transport demand will return to its previous trend.

At the same time, there has been continued progress, both technological and political, in the electrification of transport. British Prime Minister Boris Johnson recently announced that the sale of petrol and diesel cars would be prohibited after 2030, an advance on previous commitments. The decline in long-term interest rates also enhances the economic position of electric vehicles, which have higher upfront costs and lower operating and maintenance costs than petrol and diesel vehicles. https://www.prnewswire.com/news-releases/auto-loan-interest-rates-drop-in-may-to-lowest-level-since-2013-according-to-edmunds-301069143.html

Not all energy-related developments associated with Covid have been positive. The convenience and cheapness of online taxi platforms like Uber and Lyft has reduced use of public transport in many cities. The pandemic, with the need to avoid crowded spaces like buses and subway cars has exacerbated this trend. And, while the option of working remotely reduces the need for travel, it has encouraged a more dispersed workforce with less need to commute to the central city locations best served by public transport.