The Climate Solutions Fund is a fillip for the Government’s fossil fuel backers and offers little in the way of energy policy reform to reduce either Australia’s emissions or power prices. Tim Buckley reports.
The world is grappling with how best to manage the health and economic consequences of two global emergencies, COVID-19 and the urgent need to reach zero emissions.
The near term is dominated by the pandemic and finding a balance between the continuing public health response to avoid a second wave of infections, and the critical need to restart our economy.
But it’s not just a restart that we’re after – it’s a new start.
The pandemic has reminded us of the clear need to accept what science experts have been warning about for decades: we have a climate emergency.
A total economic transformation is needed to put our country onto a sustainable pathway. The technology-driven opportunities are enormous and the environmental need is clear.
Whether Australia chooses to act is globally irrelevant, but domestically damaging. Why? Because the world is already moving towards zero emissions.
Australia will simply be left behind if we choose an economic stimulus path based on the Federal government desired ‘technology-neutral’ approach announced last night which, in reality, is nothing more than an excuse to provide yet more taxpayer monies to subsidise the entrenched incumbent fossil fuel industries that dominate the Australian economy today.
The government has also barely given a passing wave to the urgent need to reduce emissions globally. Yet Australian banks, insurers and superannuation funds came out this week calling for an economic recovery focussed on stimulus measures consistent with the Paris Agreement climate targets.
The King Review looking at the government’s climate policies is a very detailed, well-articulated report by experts, albeit in our view, hamstrung by the scope of mandate.
But Federal Energy Minister Angus Taylor’s response suggesting he would “love to be able to achieve net-zero by 2050 but ultimately that will depend on the pathways of technologies to deliver that without damaging the economy” reeks of political and fossil fuel industry cronyism.
This month the International Energy Agency (IEA) put out a briefing note highlighting that each country’s economic recovery packages post COVID-19 should be aligned to Paris to best meet agreed climate and sustainability objectives.
The IEA stresses we need to look beyond obvious fossil fuel candidates for new investment in renewable energy and energy efficiencies, and highlights the massive opportunity open to us now in laying down the foundations for the huge technology-driven growth in electric vehicles, batteries and zero-emission hydrogen-producing electrolysers, such as being planned for Rockhampton in Queensland and Dongara in West Australia.
Zero emissions hydrogen and associated technologies will entirely reshape the industrial manufacturing landscape globally over the coming two decades.
As Chief Scientist Dr Alan Finkel AO has been highlighting with his National Hydrogen Strategy, Australia needs to be at the forefront of research, development and deployment in the local context to keep pace with the rest of the world.
This clear roadmap fits nicely into the broader strategic interest of strengthening and onshoring our critical supply chains by reinvigorating Australian manufacturing. We can best leverage massive new investment in low cost zero-emissions energy whilst at the same time taking advantage of our improved international competitiveness as a result of the low Australian dollar.
Now is not the time to be talking of a ‘technology-neutral’ approach.
For decades, Australia’s fossil-fuelled coal and gas industry has been externalising all of its exported carbon emissions to the shared atmosphere. Add to that waves of taxpayer subsidies, diesel fuel rebates, royalty holidays, perpetual tax holidays using tax-havens, financial engineering and accelerated depreciation lurks, and we have an industry that is deeply, unforgivably reliant on massive government handouts and subsidies.
And now, the jaded carbon capture and storage (CCS) chestnut has been rolled out yet again by industry, with the Minister lamely proposing yet another round of subsidies for this old fig-leaf.
Despite decades of subsidies, there is not one single unsubsidised coal CCS project in the world. Not one. Three facilities have been built at great expense to North American taxpayers: Boundary Dam’s C$1.4bn in Saskatchewan, Petro Nova’s 240 megawatt (MW) facility in Texas and Southern Company’s US$7.5bn Kemper facility in Mississippi are entirely white elephants. Petra Nova is the only U.S. facility still operating, and it receives a US$50/tonne carbon price subsidy, despite the U.S. federal government having no carbon price!
There is zero commercial justification for Australian fossil fuel firms to invest in CCS absent a price on carbon. As the ABC Four Corners program clearly articulated yesterday, the political environment on climate change is now so toxic that a market signal to support CCS and a decarbonisation strategy is the last thing either side of our political interests will advocate for.
The rebadged government “Climate Solutions Fund” is another smoke and mirrors marketing attempt that will not fool lenders and insurers already moving away from fossil fuels. The federal government currently has zero interest in delivering on any meaningful, sustainable emissions reduction program or target.
But everywhere else, global momentum is building. The combined, growing weight of the RE100, Climate Action 100+, the Task Force on Climate-related Financial Disclosures (TCFD), the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the Sovereign Wealth Fund of Norway and even the moves by Blackrock (the world’s largest fund manager), as one of the now 134 globally significant financial institutions with formal coal divestment polices (with 34 new or improved policies announced to-date in 2020, double the run rate of last year) all show the momentum is moving in just one direction.
And almost all of the European oil and gas majors (Shell, Total, Equinor, ENI and Repsol) have all committed to variations of BP’s “net zero by 2050, or sooner” pledge of February 2020 suggesting global momentum in the current technology driven energy transition is rapidly occurring.
Australia needs to use its economic stimulus to kick start the economy in two ways. We must invest in clean industries of the future – solar, wind, green hydrogen / ammonia / aluminium, batteries, interstate grid connectivity and onshore processing of minerals like rare earths. With our abundant resources, Australia could easily become a renewable superpower, ahead of the game.
Secondly, and remembering the record-breaking fires of last summer we’re still recovering from and with next summer’s worrying season on our doorstep, we must invest in adaption to prepare for the inevitable increase in environmental disasters already baked in for Australia’s future by our failure to plan to-date.
It is critical that we invest now in critical mass and incentivise multiple pilot projects at scale to ‘learn by doing’ in the Australian context.
Zero emissions hydrogen is far from commercial today. But investing now to build the energy ecosystem of the future is where Australian government efforts should be.
The fossil fuel industry is fundamentally at odds with the Paris Agreement and a liveable planet. They rely on subsidies and handouts and investment in failed and obsolete technologies while continuing to pour dangerous levels of pollutants into our shared atmosphere.
This is not time for trying to hold back the tide.
Rather than bastardising the renewable energy mandates of the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) into absorbing failed CCS and fossil gas infrastructure technologies – also suggested by the Minister – we need our politicians to increase and extend the funding of these institutions so that they can continue to work towards the sustainable future Australia needs.
My word, it’s back to the drawing board Minister.
Please listen to the experts.
This article has been cross-posted from RenewEconomy with the author’s approval.
Director of Energy Finance Studies, Australasia, Tim Buckley has 25 years of financial markets experience, specializing in equity valuation, including as a top-rated analyst and as co-founder and managing director of Arkx Investment Management. You can follow Tim on Twitter @TimBuckleyIEEFA.