COP26 clarifies economic realities of emissions cuts

From Australia’s perspective, a pragmatic, 11th-hour move by India resulted in a better-than-expected outcome of the COP26 summit in Glasgow. Close to the end of the negotiations, India insisted it would only agree to the main conference document – the Glasgow Climate Pact – if the wording to phase out unabated coal power and inefficient subsidies of fossil fuels was scaled down to a “phase-down” of unabated coal power. The modification was a defeat for those who had pushed for the summit to agree to a phase-out of coal, such as Boris Johnson and John Kerry, and activists such as Greenpeace, which claimed the 1.5C goal is “only just alive’’. The reference to “unabated’’ coal power underlines the value of the Morrison government’s including carbon capture and storage in its climate modelling, released on Friday. Australia now has time to improve that technology. And the agreement affords mining communities in the Hunter in NSW and in central Queensland breathing space as they transition to cleaner industries, as Australia moves towards net-zero emissions by 2050. The climate modelling forecasts the value of coal exported will halve by 2050. Markets will determine opportunities for Australian coal and at the moment those markets are strong, Resources Minister Keith Pitt said on Sunday.

Queensland’s coal communities were celebrating the last-minute COP26 change on Sunday. Anne Baker, Mayor of Isaac Regional Council, one of Australia’s largest coal-producing regions, said the revised wording “validates what we have been saying about the need for transformation in the mining industry rather than transitioning away from the industry”. In the Hunter region north of Sydney, as Tom Dusevic wrote on Saturday, workers and their families know there is an end date to coal-fired power, but it won’t be next week or next year, and that coal exports will continue for as long as foreigners keep buying it to make electricity and steel. Being practical and resilient, such communities are looking to how their communities will prosper in decarbonisation’s new economy. As Newcastle electrical fitter Nathan Clements, a delegate of the Australian Manufacturing Workers Union said, the task for government, business and unions was to re-skill fossil fuel workers for sustainable industries. That may ­include green hydrogen, pumped hydro or battery storage.

India’s initiative in Glasgow will facilitate its own economic progress and that of other developing nations. Seventy per cent of India’s electricity is powered by coal. And, while virtually all Indian villages are now linked to the power grid, millions of people still lack electricity in their own homes. For Australia and other developed nations, it was clear from COP26 that plenty of difficult challenges are looming in the next few years. High among them is the existing pledge by developed nations to provide climate finance of $US100bn a year to developing nations, which was supposed to happen from 2020. Debate was raging in Glasgow about how to catch up. Beyond that, Graham Lloyd wrote on Saturday, is the annual $US1.3 trillion, which a group of 24 “developing’’ nations – which include China (the world’s second-largest economy), as well as India, Indonesia, Pakistan, Saudi Arabia and Vietnam – expect the developed world to fork out to cover the cost of cutting carbon dioxide emissions in developing nations from 2030 onwards. The promise of major support has already been adopted. Thrashing out the details will be high on the agenda for COP27 in Egypt next year and COP28 in the United Arab Emirates in 2023.

Following the summit, the government has opened up a wedge with the opposition by sticking to its 2030 emissions reduction target of 26-28 per cent reduction on 2005 emissions levels. Anthony Albanese, who is yet to announce Labor’s 2030 emissions target, said Australia’s report card from the conference was a “definite fail” after COP26 urged nations such as Australia, which had not increased their 2030 targets, to do so in time for next year’s summit in Egypt. But Energy and Emissions Reduction Minister Angus Taylor and Foreign Minister Marise Payne said Australia’s 2030 target was fixed “and we are committed to meeting and beating it, as we did with our Kyoto-era targets’’. Australia’s latest emissions projections to 2030 suggest the nation will achieve up to a 35 per cent reduction by 2030. That was after cutting emissions faster than many similar developed countries, including Canada, Japan, New Zealand and the US, and faster than the OECD average. For the sake of primary production, the government, sensibly, did not back a pledge, led by the European Union and the US to cut methane emissions 30 per cent by 2030. And the opposition agreed. The meaningless “colossal fossil’’ award from activist green groups in Glasgow shows Australia stood its ground. For some green fanatics, the most extreme overreach would never be enough.

In looking to net zero by 2050, its modelling relies heavily on improving existing technologies and technologies yet to be developed. The conservative right of the Coalition’s base, especially in the National Party, is fractious about that commitment. But the modelling provided economic data that should take heat out of the issue. It revealed that businesses and households would have faced interest rate hikes of up to 1.5 per cent under penalties imposed by global financiers if the government had failed to adopt the target. Households would have paid an extra $25bn a year on home loans, and business and credit card debts. The penalties would also have triggered a 17 per cent investment collapse by the middle of the next decade, cutting 0.9 per cent from gross domestic product and leaving each Australian more than $650 poorer.

After years of emotion and moralising over climate change, on both sides of the debate, COP26 has brought the economics of emissions reduction into sharper focus. Australia is co-operating with the rest of the world in doing our share, but not going beyond it. That is vital. We should also avoid heavy handouts to developing nations. While the process of cutting emissions will be difficult for much of the economy, the current road map, relying heavily on technology, offers the best way forward.