Markets, technology key to low carbon transition

In its scoping paper on energy and climate change policy, the Business Council of Australia — the voice of more than 100 of the nation’s largest corporations — argues that the economy’s energy transition needs to be driven by technology that “will not only get us to a net-zero emissions future but will also create new jobs, opportunities and industries, and maintain Australia’s competitiveness”. With healthy profits to be made from harnessing technology to deliver affordable, reliable power, energy entrepreneurs, including companies represented by the BCA, should take the long view, lead the way and invest. Those with the vision and flair to do so would find no shortage of overseas partners to inject capital in viable projects, as coal and other resource industries have done for generations. Based on calculations by the EU, the BCA paper argues new investment of at least $22bn will be needed every year until 2050 to deliver net-zero emissions. To put the figure in perspective, the Snowy 2.0 pumped hydro project proposes to spend about $5bn across five years.

That is a tall order. But if a sustainable transition to lower and ultimately zero emissions is to be achieved, investment and market efficiencies — rather than taxpayer-funded subsidies and centralised decision-making — will get us there. The vexed question of new coalmines and coal-fired power plants, for example, would be best resolved not on the whims of politicians but on technological progress with carbon capture and storage and whether banks and investors support them financially.

Investment in renewables and gas should be encouraged by new figures from the International Energy Agency showing clean energy transitions are well under way. Coal-fired power generation in advanced economies declined by nearly 15 per cent last year, causing big falls in emissions in the US, Europe and Japan, as Graham Lloyd wrote a week ago. That decline offset emissions rises in developing countries, where more coal-fired power stations were built. The changes in advanced economies were driven by an increasing switch from coal to gas, wind and solar energy, and the restart of nuclear generation. The IEA said natural gas produced more electricity than coal for the first time ever and wind-powered electricity almost matched coal-fired electricity.

The growing importance of gas in advanced economies overseas underlines the economic and environmental irrationality of NSW holding up the Santos Narrabri gas project for almost 10 years and Victoria banning all gas exploration. Geoscience Australia estimates Victoria has potentially recoverable resources of shale and tight gas onshore to meet 40 years of east coast domestic demand. The BCA report notes that gas will be an important transition fuel in electricity production, as backup to renewable power generation. The BCA says development of new fields in Victoria, the Northern Territory and the Cooper Basin should occur. In response to the Australian Competition & Consumer Commission’s warning that high gas prices are forcing factories to shut and companies to go into liquidation, recalcitrant state administrations should remove their restrictions to open the way for an expansion of private investment in the sector. The role of government, as the ACCC said in its report released on Monday, is to provide infrastructure to move gas from Queensland and the Northern Territory to other states.

A crunch point on carbon is coming, with moves afoot for a new climate change plan to impose net-zero emissions by 2050 on participants at the UN climate summit in Glasgow in November. Scott Morrison’s instincts to avoid signing up to such an erosion of national sovereignty are right and reflect the outlook of most Australians. Like the BCA, The Australian has long supported a price on carbon and trading emissions permits as the path to least-cost abatement. But more than a decade of poisonous politics and false starts precludes that option for now.

As the Morrison government recognises, technological advancement will be essential to significant carbon abatement. The question of who will pay — taxpayers or industry — is critical. Aside from budgetary concerns, governments picking winners has a disastrous history in Australia; look no further than the tens of billions of dollars handed to car manufacturers for decades. Subsidies for renewable energy have already cost taxpayers and consumers billions of dollars. At a time when many renewable schemes are set to wind up, demands for cutting emissions are increasing and the Victorian moratorium on conventional gas exploration is due to end in June, technological advances and markets offer the business sector an important opportunity to capitalise on Australians’ demand for cleaner, affordable energy. Governments must help create the conditions by way of infrastructure and minimising red and green tape. The momentum for sustainable, greener energy needs to come from business and markets. They should get on with it.