sustainable economy
16 Jun 2009
The Unavoidable Green Future
Yesterday, we published an extract from Ben McNeil's book 'The Clean Industrial Revolution'. Today, Ben Eltham speaks with McNeil about the economic opportunities of climate change
Ben McNeil is a very well-spoken young man. The economist and climate scientist is a far cry from the stereotypical climate campaigner — whether that’s a Flannery-style Akubra-wearing bushie or an inner-city trendy "basket-weaver".
In fact, McNeil looks and speaks like the disarmingly normal and mainstream young professional he is. His message is equally mainstream: that climate change is as much about the bottom line of dollars and jobs as it is about rainforests and polar bears.
As a senior research fellow at the Climate Change Research Centre at the University of NSW, McNeil knows what he is talking about. "I’ve been doing climate change science for about 10 years since my doctorate, and over the past five years I’ve been putting my expertise into economics as well. I did a Masters of Economics as well … because we’re moving from the diagnosis of this problem to the cure."
The genesis of McNeil’s book lay in a meeting with former prime minister John Howard. "My scientific research has been about ocean acidification and greenhouse gases in the ocean, and also understanding the flow of net carbon in the natural and human-induced world," he explains, "and so I went and presented as a young scientist to the prime minister and cabinet."
McNeil couldn’t understand why central economic and national security policy makers weren’t also in attendance. "This is not a fringe issue. This is not a discretionary issue. This is an unbelievably core part of Australia’s future in terms of the economy and the environment. I thought, ‘This is insane.’"
After the meeting, McNeil had a short conversation with prime minister Howard. "He came up to me and said, ‘Great presentation,’ and we had a very nice chat. He sort of said to me something along the lines of, ‘It’s really great that you’re in climate change science, it must be really good for you considering how it’s such a big issue now.’"
"I understand where he was coming from — many people in society come from the individual perspective — he was trying to say that because climate change is such a big issue, it’s going to be good for me because I’m an expert." McNeil was staggered by the prime minster’s failure to grasp the importance of climate change as an issue.
"It was a bizarre thing," he says, which directly led to his decision to write The Clean Industrial Revolution.
"This book is actually saying there is a huge economic tsunami coming down on Australia if we don’t address these challenges."
"We’ve got industries that have grown their wealth by using a lot of oil and coal, and we’re now in a situation where that’s unsustainable in any shape or form — we have to decouple our economy from those resources. We have to de-coal, de-oil and de-carbonise our economy and that’s a big change, there’s no doubt about that. That is a change to the economy and I think that some sectors find that change in our society quite frightful. And in particular there’s a whole group who are going to have to change or they’re not going to be around in the next 10, 20 or 30 years."
There are no prizes for guessing which industries they are. "The coal industry, for example," McNeil continues. "One of the things about the coal industry is that for some reason they always seem to think that if we impose carbon cuts to the economy this is going to devastate their industry, and I actually think it’s the complete opposite of that. I think if we drive carbon cuts that make them put more R&D into innovation in low-emission coal, that could be a big first-mover advantage in a world that’s going to shift towards low carbon."
"Every single economic reform that’s happened in the country, whether it be occupational health and safety in the 80s or lowering tariffs, there was always this massive scare campaign from particular industry groups. But in the end it turned out that both those things were actually good things for Australia."
McNeil thinks Australia is now in a similar position to the now-bankrupt US car industry. "The US car makers went on a huge R&D spend to essentially develop gas guzzlers, and they did so because the government was weak. This was in the 1990s, oil was really cheap. The thinking was that oil is going to be around forever, people are going to want bigger cars, even though they don’t need them in the city, so they developed these Hummers and other massive gas guzzlers. Fuel economy didn’t change for 30 years in the US."
In contrast, Japanese car-makers developed fuel-efficient vehicles, spurred by Japan’s more stringent fuel efficiency regulations. "Japan is completely dependent on foreign oil and they actually have had a very enegy-efficient economy for a long time. So Toyota and Honda spent massive amounts on R&D on clean, fuel-efficient vehicles."
"Right now we’re in the same position in Australia as GM was in the 1990s. We’re protecting high-carbon assets. We’re protecting coal, we’re protecting oil and we are looking at carbon price, a carbon cost in the future. There is no doubt that the world is going to value carbon, and that means higher carbon costs. So how the hell is coal going to survive in a world moving to low carbon? It’s not going to."
McNeil points to research by Chris Reidy at the University of Technology Sydney which estimated a public subsidy of $9–10 billion on 2005–06 figures for the transport and electricity industries alone.
"When people say let’s do nothing, let’s just play that scenario out," McNeil continues, "if we do nothing in terms of emissions, it’s essentially saying let’s rely on these old relics for our future prosperity in terms of economic growth. But Japan and the EU, who buy most of our coal, are de-carbonising their economies. Why would they be buying coal? They’ll be getting gas, they’ll be getting renewables, they’ll be getting more nuclear, they’ll be doing other things. So someone who says this will be devastating to our economy — it doesn’t make sense."
But what about the argument, often voiced by the Opposition, that Australia should wait until the rest of the world puts a price on carbon before it acts?
"It’s funny. When someone says there is no current price for carbon they’re just living in la-la land. There’s a very strong shadow price for carbon right now, irrespective of the Government. Last year, 45 coal-fired power stations went off the books in terms of planning. They didn’t go off the books because of coal technology — we’ve had coal for a long time. They [were cancelled] because of the financiers, the Wall St bankers. They said ‘Actually, in a carbon constrained world, where you’ve got a 50-year asset, the carbon price could go from $20 a tonne to $200 a tonne within 10 or 20 years, so we’re talking about huge carbon liabilities here.’"
"These guys in the coal industry are just delusional, completely delusional."
McNeil is equally scathing about the carbon leakage argument. "An aluminium smelter is a 50-year investment. Maybe in the next 10 years these firms will get some gain from going to China, but in the long-term there’s a massive risk there, so they’re not going to go there. They’re actually going to places like Iceland. Iceland has geothermal and hydropower on their grid. Iceland is attracting Alcoa and Microsoft and IBM data centres because they have stable, secure carbon-neutral energy supplies, which completely eradicates all those potential carbon liabilities."
"Here’s another example which I quote in the book: Google, irrespective of the Government, are actually putting a price for carbon into their investment decision matrix. When they go out and build a big new data centre, they’re putting in a carbon price that essentially shuts out all high-carbon grids. They’re not going to come to Australia. There’s no new investment from these innovative firms here because we have a carbon-intensive economy."
Paradoxically, McNeil is something of an optimist about the future. "People somehow think that we’re going to go back to the dark ages if we do this and it’s quite the contrary. This [book] is trying to say this is actually in our economic best interests to do this, as well as our environmental interests."
"For me the biggest thing we can do is get away from this economy-environment crap. That will take the issue from discretionary, which it is now, to core. Actually, if you look at a world that is turning to low-carbon fuels, materials, buildings, designs, IT — if you’re looking at that world, we have to position ourselves for a world that is moving that way."
"I think we can lead it."
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CSIRO SPRS (retired)
Good stuff - and timely.
McNeil is accurate about industry howls about costs of environmental changes. I remember another example from the PVC manufacturers many years ago - initial estimates of the cost of reducing vinyl chloride levels for occupational health reasons turned out to be 10 times the real costs after they were forced to do it by regulation, so had to allow the engineers to fix the problem.
There’s a thought provoking column in today’s (16/6/09) Age by Lesley Cannold (p 13). She argues that “government action on on the climate issue will be characterised by incrementalism and compromise” and that “the sooner this is recognized and strategy and tactics are geared to account for it –– the more likely advocates will be able to capitalise on the opportunities for change that do exist”. “what we have is a failure of communication and tactics, not of understanding”. We must avoid provoking in the majority of people the “feelings of powerlessness” and encourage “the desire to act.”
McNeil is communicating well, more power to his pen!
Jane E
I have a rather more jaundiced view of why Australia has been so slow on the uptake as far as the colossal opportunities offered by a climate-sensible economy.
In about October 1990, there was published an edition of Scientific American which was full of new technology for lower greenhouse gas production (as it used to be called). There was a lot of talk, energy, research.
Not a lot happened. It remained marginal. Over the years, the electric car was produced and mothballed in the USofA. Green-ness was equated with eccentricity in the English-speaking countries.
Not so in Europe. Greens in the German parliament, wind power in Denmark, nuclear power (!) all over the place (although this in UK and US too).
You may recall that George Bush Snr became US president in 1989, a man with deep connections with the oil industry.
I think that it is too easy for trans-national industries to gain too much influence in the two party political model. Australia should cultivate and defend its “minor” parties, and should actively demand more proportional representation. Most Western European democracies have some form of proportional representation at the national level.
Australia has massive potential for alternative energy sources. Why are we still arguing about doing something with the terajoules of sunlight that drench us? Why do small companies trying to develop wind, geothermal, wave and other energy sources find it difficult to raise capital? Could it be because the rich and powerful do not want any one else to have a chance until they have squeezed the last dollars out of the old economy?
The resources industries have far too much influence over Australian politics. They appear to be concerned only with extracting as much profit as possible in the dying days of the non-accountable carbon economy, then walking away, having repressed efforts to establish alternatives.
This is such a false view presented by the coal industry, you wonder what they promised to Rudd to make up for him making a complete ass of himself to the world.
I don’t care that he looks an ass, but I do care that he is protraying Australia as a nation of bludgers who care only about protecting our own cosy little world. By his actions he has made himself un-Australian. Perhaps that is the reason for “shake of the sauce bottle”, and all the rest of his corny phrases - a way to keep in favour with the voters.
If Rudd is still considered the more popular leader, surely that is only becasue the alternative is so appalling.
I’m with you, salamander!
I think that even those “Howard battlers” that Rudd took over and has since called the “Working Families” are finally getting sick to death of “Elmer” Rudd. He has about as much commitment to ANYTHING other than political wedging and game playing as John Howard did.
Actually, not true, JWH had a commitment to make things as hard as possible for the ‘little person’,and retention of power.
I hear this morning that the Yanks have out a report that says that the Global Warming situation is damned URGENT, and MUST have action, NOW!
One could hope that Rudd and Wrong Wong would also take some notice. Also Religious Nutter Fielding. Seems he missed this info in Washington completely on his recent visit. What a mob of whackos!
But yes, our Government and Opposition are ‘in bed’ with the Big Polluters. And yes, you could wonder what is in it for them, long term. Besides being utterly short-sighted and stupid, they think that the Money men will think of them when they retire,and give them a lovely sinecure job in gratitude for services performed. That has always been the way.
But now, it is quite likely that these Big Polluters will no longer be in existence when the pollies retire, unless they get their heads out of their rectums, like damned pronto! Dazza.
p.s.
Capt’n Bligh, Premier of coal blighted Queensland, which has ridden on the backs now of coal mining and burning for many years, seems to have woken up to the future of coal.
She is going to try and flog off Queensland’s Government owned Coal Railways, Port Coal loading facilities to the Chinese as fast as she damned well can. Before the returns drop off the wall. She of course, can not say this in public, or else she is going to be stuck with them.
Even the Coal Miners and Chinese buyers may well wake up and offer her peanuts, although the Chinese now own the biggest coal mine in the Southern hemisphere, with the LibNats friend Mr. Clive Palmer, and intend to dig the coal out as fast as they possibly can, while they can. Of course, no one wants to think of (or be held responsible for) the consequent release of all this carbon into our atmosphere. Certainly NOT Mr. Palmer and the Queensland Government.
Certainly NOT our Mr. Rudd, Mr. Ferguson, Ms. Wong and Mr. Garrett.
Problem here is that the revenue from the coal transport by Rail and the port loading has propped up Queensland to a large extent, especially the Coal Rail bit which subsidises City Train. I have not heard of her accepting the responsibility for the increases in operating costs for City Train which will have to be covered by increased fares, or reduced services. Or both!
One wonders if the QRN Coal Transport facilities in the Hunter are also for sale? QRN is also on her list of Public Assets for Sale, but without the coal, there is not a lot left, when even now, Road Transport is subsidised to such a large extent from the Public Purse, and infrastructure for Rail is so far behind the 8 ball.
Another very blind spot of Federal and State Governments, when Europe and the US are spending billions of $ on Fast Train infrastructure even as we write.
Queensland is also going to need replacements for Coal Fired Power Stations, as quite a bit of Train Services are Electrified, as much as other Home and Business requirements. Gas is going gangbusters, and some of the coal burners are doing conversions.
So even as they deny, deny, deny, they are being forced to act, even if very belatedly. Dazza.
Governments do have the power to encourage innovation, without spending a penny.
Remember when NSW and Victoria brought in the 250cc limit for young motorcycle riders? The idea was that smaller, less powerful bikes would be safer.
The industry’s response was quick and dramatic. Within a very short period, the 250’s were beating the 500’s around the race track.
Encouraging car manufacturers to produce more energy efficient cars could work in a very similar way (with hopefully better focussed results). Small, low powered fuel efficient cars with a star rating, based on how safe and low polluting they are could attract discounted rego and insurance fees, and P plate drivers could be restricted to them, just like the bikes.
For a more detailed argument, go here:
http://thecomensality.com/avasay/?p=70
www.avasay.com
“McNeil was staggered by the prime minster’s failure to grasp the importance of climate change as an issue.”
What sort of “issue”? If political there would be a policy response.
Howard was a pragmatist and follower of conventional responses. He was certainly not going to act independently of the “big polluters”.
On the other hand Mr. Rudd is very noisey at doing exactly nothing to reduce CO2 emissions.
“These guys in the coal industry are just delusional, completely delusional.”
Whether or not they are delusional, they certainly have the Australian government over a barrel.
I like Ben McNeil’s optimism but I wonder what makes him so convinced there is no future for the coal industry. Clearly it still has enormous influence over political decision-makers, who are for the foreseeable future, bent on protecting its interests.
The government is not blind to the urgent threats of climate change but choose to look away, especially when the industry flexes its very large muscles. I doubt whether the coal industry guys are “delusional” about the situation.
I wonder whether McNeil’s optimism and the politicians’ inaction might be better explained in terms of Derrick Jensen’s Endgame: On the problem of civilization, which sees civilization as a violent quest for power, ultimately and insanely seeking death over life.
Having not read McNeil’s book yet, I hope it is not attempt at techno solution, or an offer of ephemeralism that will be subject to the Jevon’s paradox, where more efficient and available resources are gobbled up by the developed world.