We can’t look beyond coal without pricing carbon
As the carbon tax starts to make its way through the legislative process, the Federal Opposition and peak business groups like the Australian Chamber of Commerce and Industry, the Australian Industry Group, the Master Builders Association and others claim our economy or their part of it will be ruined by a price on carbon.
A similar view was apparent at a recent Oxford-style debate organised by Tom Switzer, editor of the conservative Spectator Magazine Australia.
The topic debated was “is a carbon tax needed to combat global warming”.
On the affirmative side was myself, John Hewson and Mark Latham. On the negative were Lord Nigel Lawson, Prof Ian Plimer and former Labor MP Gary Lyon.
We were told to expect a ‘sizeable’ anti-carbon tax audience among the 450 people but it was still surprising how anti-carbon tax the audience was. Before the debate a poll was taken. Of the 450 in attendance, just 2 per cent supported a carbon tax, while 90 per cent were opposed and 8 per cent undecided.
A key concern voiced by the audience - and Australians more generally - was why a country like Australia, with just 2 per cent of global carbon emissions, should do anything that would inflict a cost to our economy without any apparent benefit.
These people generally view any actions on carbon emissions by Australia as purely symbolic, much like Australia’s 0.5 per cent troop contribution to the Iraq war in 2003.
However, this is not the case. Australia actually needs a carbon price for genuine, practical reasons to maintain the strength of our economy into the future.
CEO of BHP Marius Kloppers, the world’s largest mining company and one of Australia’s biggest coal producers, touched on this this when he called for Australia to “look beyond coal”. He recognized that the coal age will not end for lack of coal, in the same way that it was famously said, the stone-age did not end for lack of stones.
It doesn’t matter how much stuff we may have in the ground, if the world markets are moving against it, it will stay there, unused, unsought and, crucially, uneconomic. As the world inevitably prices carbon pollution, coal will become more uneconomic.
Coal will not be uneconomic next year or even in five years. However, staying with coal is like exporting typewriters to a world demanding iPads. We will miss bigger inevitable future economic opportunities by protecting high-carbon interests.
The fact is Australia can’t ‘look beyond coal’ without pricing carbon pollution. It doesn’t matter how each of us views the scientific evidence for climate change; the world energy markets have already moved on and are pricing carbon. It would be economically dangerous for us to avoid, neglect or ignore this trend.
According to recently released global UN finance figures, there has been $30 billion more investment in clean energy (solar, wind, hydro, geothermal and biofuels) than fossil fuels every year since 2008. China is now the world’s largest investor in clean energy, spending $48 billion in 2010, nearly double that of the United States.
For the first time, clean energy in China is expanding faster than coal. This is not to suggest there is more clean energy overall (far from it), but over the last few years, despite flagging international climate negotiations, the worldwide shift to pricing carbon pollution is happening.
It is happening because there is more wealth to be generated, better health and greater economic opportunities to be found in cleaning up the world than polluting it. In the long term, human innovation and technology is more powerful than any commodity we dig up.
China doesn’t need a formal carbon price to move its economy because Beijing directs the flow of clean energy investment into the provinces - as it has done since 2009. However, in Australia we don’t live in a planned economy, we live in a market-led liberal democracy where a carbon price/tax is the only way to meaningfully shift the economy at least cost.
A carbon price reduces emissions and promotes innovation to commercialise clean technology to supply domestic demand. These innovations will improve our comparative advantage in supplying and exporting new, clean technologies to the world.
At the same time, it needs to be recognised reducing carbon emissions will not be disastrous for our economy. Britain, the nation who invented coal use, has had a number of carbon taxes since 1993. A fossil fuel tax in 1993, a climate change levy in 2001 and EU imposed carbon price in 2005.
In response, energy shifted from coal to low carbon technologies. Carbon emissions in the UK dropped 15 per cent since 1990, yet the economy grew over 50 per cent. To service this new economy some 900,000 workers are employed in Britain’s $260 billion clean technology sector, positioning them to service a growing global clean technology market.
No single country can solve the world’s carbon problems but new low-carbon technologies could expand our international economic and environmental opportunities.
Dr. Zhengrong Shi developed a new efficient solar panel with leading Australian researchers at the University of New South Wales in 2000.
Without a price on carbon and little domestic industry in Australia, he moved his business to China with Chinese government backing. Suntech, Shi’s company, has now exported some 3,000,000 of those Australian developed solar panels to more than 80 countries around the world. Suntech has annual revenue of some $3 billion, while Dr Shi is now one of the richest people in China.
No matter how small Australia may be, our ideas and technology can potentially change the world.
We still have low-carbon innovations coming from our universities and CSIRO without a carbon tax. But to capture a slice of the multi-trillion dollar clean technology market, our ideas must be commercialised in the marketplace.
A carbon price creates that marketplace. It would be the spur for our best entrepreneurs, engineers and designers to develop and commercialise clean technologies.
If we don’t price carbon emissions, we protect high-carbon interests (like coal) from a world that is starting to price it anyway. This form of carbon protectionism is not in our economic long-term interest. Interestingly, after the Spectator Australia debate many in the audience changed their minds on introducing a carbon tax. Support for it climbed from 2 per cent to 17 per cent.
Most interestingly, 41 audience members who opposed the carbon tax completely changed their view after hearing the arguments.
That is why we need to move away from the slogans to an open and honest discussion on the big issues to give the arguments enough time to be heard and for people to understand.
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