Energy Efficiency: The Gift That Keeps on Giving


The Australian climate change debate chugs on. While the Government meets hundreds of lobbyists arguing for special assistance and free carbon permits, the public, meanwhile, appears to have taken its own position: polls consistently show that Australians demand action on climate change. But at this crucial stage, the debate has taken a pause for a moment while the Opposition works out whether we’re facing any problem at all.

It’s scarcely an environment in which adequate scrutiny is being given to this important policy. Indeed, as far as actual accountability is concerned, the past fortnight has seen the Government largely left to its own devices. This is a shame, because there are plenty of very sensible things the Opposition could be saying about Labor’s climate change policies. Here’s an example: energy efficiency. In order words, what to do with the electricity we already have.

The issue has been playing in the US media and blogosphere recently as a result of an article in Salon by American scientist and author Joseph Romm on the perverse incentives that shape our energy markets.

"Suppose I paid you for every pound of pollution you generated and punished you for every pound you reduced. You would probably spend most of your time trying to figure out how to generate more pollution."

Romm’s article goes on to make a point so blindingly obvious that most Australian politicians and businesses have been ignoring it for decades. The point is this: energy efficiency is our single best strategy for reducing carbon emissions.

Sounds simple, doesn’t it? That’s because it is. By using less energy to perform everyday tasks like turning on the lights or driving our cars, we don’t have to burn as much carbon. Our so-called "carbon intensity" goes down, and if we do it aggressively enough, so do our emissions. My grandma had a name for this: she called it "common sense."

The energy efficiency argument is so powerful, it has the potential to short-circuit the current debate over carbon permits altogether. This is because energy efficiency not only saves carbon, it also saves money. That’s right: improving energy efficiency actually offers a net benefit to businesses, governments and households. But you won’t hear too many "trade-exposed carbon-intensive" industries talking about energy efficiency over the next few months. Why should they? The government has just offered them free money in proportion to how inefficient they are.

A range of recent studies have examined just how much potential there is for energy efficiency gains in Australia – using existing, proven technology. Estimates for the construction industry, for example, range from 6 per cent up to 40 per cent. For the manufacturing sector they range from 6 per cent to 46 per cent. For households they range from 13 per cent up to a paradigm-changing 73 per cent. These figures, by the way, come from a Climate Institute paper summarising estimates by Sustainable Energy Authority Victoria, the Federal Government’s Energy White Paper, the National Framework for Energy Efficiency, and a report by Allen Consulting on the economic impact of improved energy efficiency. A recent McKinsey study concluded that "cost-effective energy efficiency improvements could achieve approximately one seventh of the greenhouse gas emission reductions required to reduce Australian emissions to 30 per cent below 1990 levels by 2020."

Energy efficiency is even better than renewable energy. Firstly, it not only reduces carbon emissions, it actually reduces energy use itself. Forget about building more wind turbines – if you improve energy efficiency sufficiently, you don’t have to build new electricity generation assets at all. Secondly, energy efficiency compounds itself into the future. It’s the gift that keeps on giving. As technology improves, new rounds of efficiency investment become possible, saving even more electricity and therefore emissions.

The policy basis for energy efficiency is sound. California has been doing it for years by "de-coupling" the revenue of energy utilities from the amount of electricity they sell. In the corporate world, consultants like Amory Lovins of the Rocky Mountain Institute raise millions by telling firms how to cut energy costs.

As Romm points out, "Economic models greatly overestimate the cost of carbon mitigation because economists simply don’t believe that the economy has lots of high-return energy-efficiency opportunities. In their theory, the economy is always operating near efficiency." Yeah, just like those mortgage finance markets.

In the real world, the opportunities for energy efficiency are vast. We can do much better than simply screwing in new lightbulbs or using more fuel-efficient manufacturing techniques. It’s called "demand management", or, for the rest of us, using less energy.

For a long time, policy makers and industry lobbyists thought that demand management could never work. That was before Queensland’s recent drought, when the Queensland Water Commission’s innovative Target 140 public education campaign succeeded in cajoling Queenslanders into making huge reductions in their personal water use. Brisbane’s daily water consumption per person went from something like 700 litres in the rainy 1980s to close to 140 litres at the height of the drought.

Then the ABC’s Carbon Cops demonstrated how easy it was to get comparable energy savings in our homes. This landmark program proved that scientists could look good on TV and showed how many simple efficiency solutions were available to the householder.

Many businesses have similar opportunities available. For the past few weeks we’ve been deluged by industry lobbyists and their stooges on the Opposition benches telling us that Penny Wong’s carbon permits would see massive "carbon leakage" as Australia’s supposedly hyper-efficient manufacturing and mining industries packed up and moved to countries where they can pollute all they like.

The energy efficiency data shows up this carbon leakage argument as the special pleading it really is. Australia hasn’t built a new aluminium smelter in nearly a decade and our plants now lag in efficiency compared to the newest and best smelters being built in Africa. Indeed, according to the Australian aluminium industry’s own figures, they’ve already been able to reduce the energy intensity of smelters here to just 40 per cent of 1990 levels. They did this when the price for carbon was zero. It does rather make the case for greater incentives for energy efficiency, not fewer.

Of course, there are some in the fossil fuel industry who absolutely hate the concepts of demand management and energy efficiency. They’re the people who make money by selling energy. Not that we should feel sorry for them. As Kenneth Davidson wrote recently in The Age, the privatised owners of the Latrobe Valley coal-fired power plants were happy enough to embrace efficiency when they took over the generators from the Kennett Government. "The new owners sacked thousands of SECV workers and decimated the coal towns built in the Latrobe Valley to service the industry," he wrote "Only small change from the $28 billion from the capital windfall from the sale found its way back into the valley to deal with the regional social and economic problems created."

But now that the shoe’s on the other foot, generators are demanding that their carbon pollution be paid for by taxpayers. It’s the age-old story of privatising the profits and socialising the costs.

No, it’s not the coal-fired power generators we should feel sorry for as we discuss climate change and energy efficiency. It’s Brendan Nelson.

This sincere but hapless servant of the Australian public has been a mediocre president of the AMA, a poor Minister for Defence and Education, and a disastrous Leader of the Opposition. After months of red-eyed emotion and single-digit poll figures, he can’t even sway his own Cabinet on the most important policy issue of the moment, climate change.

The carbon and financial savings to be made from increased efficiencies are not fine points, they are shouting for attention, but there’s simply no room for them in a Parliament hamstrung and distracted by the petty posturing, flat-earthism and power plays of the Opposition.

Kevin Rudd and the backroom boys at Labor HQ must be delighted with their decision to give the Climate Change portfolio to Penny Wong. While the South Australian Senator can at times seem one-dimensional, even robotic, her impressive ability to stay on message is only amplifying the embarrassing prevarication of the Liberal’s senior leadership. After weeks of tough-talking on carbon permits, the Opposition is back to where it started: with Malcolm Turnbull’s policy. The one that it took to the last election.

Although those who have studied the gradual slide of the Liberal Party away from liberalism in the past 20 years will not be surprised, as a simple matter of political tactics it’s amazing that the Opposition seems so completely wrong-footed by climate change. In fact, it could get worse. There’s enough disgruntled skeptics on the back bench to suggest that this is not the last word we’ll hear on this issue. If Turnbull does eventually take over as leader, it’s entirely possible than the Minchin faction of climate change hardliners will actively destablise his leadership. Given the polls on the issue, this would be electoral poison.

On current performances, the federal Liberals are heading for a long spell in political purgatory. It’s a crowded plane of existence currently, given that it’s occupied by all the state Liberal branches. Well, all except Queensland’s, which on the weekend merged itself out of existence altogether. It’s been said that nothing unites a party like being in government. The past week has shown that the other side of that proposition is also true: nothing divides like opposition.

Ben Eltham is New Matilda's National Affairs Correspondent.