Book launch: Superpower - Australia’s Low-Carbon Opportunity
Economist Ross Garnaut lays out how the government can set Australia on the path to 100 percent renewable energy in his new book on climate policy.
Climate change mitigation is arguably the most divisive policy area in our nation's recent history.
Launching his new book on climate policy, leading economist Ross Garnaut lays out how the government can set Australia on the path to 100 percent renewable energy.
On Thursday 21 November, 150 guests joined Professor Garnaut at UTS to discuss “the diabolical challenge” of policy making in this area, alongside the Hon. Bob Carr and UTS Executive Director, Social Justice, Verity Firth.
In Superpower: Australia’s Low-Carbon Opportunity, Professor Garnaut analyses the state of the argument over economics and assesses progress on slashing carbon in the current Australian context: no ambitious targets from government but a big movement by investors and a shift in markets. Might Australia pull it off? Ross Garnaut is uniquely placed to answer this and related questions.
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Professor Stuart White, Institute for Sustainable Futures: Welcome to this book launch on a topic of some importance at the moment. Before I start I'd like to acknowledge the Gadigal people of the Eora Nation on whose land UTS stands and on behalf of all of us present pay respects to their elders past present and emerging and recognising them as the custodians of knowledge in this place.
So we're here tonight to talk about climate change, energy policy, issues that are in the newspapers almost every day and we can see out the window the - we can sense from the smoke in the air, the concern that people have about the impact of climate change and it's created a significant increase in interest. UTS is proud to be supporting the public debate on climate change and on the solutions to climate change in particular.
So that's what tonight is all about, talking about the solutions to climate change. We're really proud and privileged to have Ross Garnaut here, somebody who's had a long career in this area, and Bob will shortly introduce Ross and we'll be hearing later from Verity Firth, who is the Director of the Centre for Social Justice and Inclusion here at UTS, another important aspect of UTS's commitment to social justice and commitment to sustainability.
So it gives me now pleasure to introduce the Honourable Professor Bob Carr. Bob is the Industry Professor of Business and Climate Change, which is very appropriate for tonight's discussion, and we're really proud to have him at UTS leading the fostering of public debate on this important issue. Bob.
Professor Bob Car, Professor of Business and Climate Change, Institute for Sustainable Futures: Thank you Stuart. Well today is a day on which the people of Sydney are breathing smoke from fires that represent an early start to the fire season and in the words of 24 former fire and emergency chiefs, quote, climate change is making bushfires deadlier and the bushfire season longer. Just a one per cent rise has meant the extremes are far more extreme, yet we know that if we don't meet those Paris targets the prospect of your children, grandchildren living in a world that's four per cent warmer is distinctly possible.
In my little book Run For Your Life I speculated - out last year - I speculated that in 2050 I might be living in a retirement home in a tower - all of the east coast of Australia would be towers of course at that time, while outside the air was full of smoke, all our national parks were chronically subject to fire; there was no fire season, fires burnt all the time and our bush supported little or no life. In the centre of Australia an area as big as the European Nation was now unliveable -this is my dystopia, Australia in 2050. All the ecological that we grew up with have shifted all over the place, scattering flora and fauna trying to find some remnants of the cool, of the wet, but without success.
Well we're deeply honoured to have Ross Garnaut here today. He brings with him a substantial record as an economist, ambassador, advisor to governments, author of that key report 2008 - The Garnaut Climate Report. While finishing this book he toured the - he was touring with Jane his wife, the Murray Darling, where he saw, he says, unarguable evidence that climate change is now here upon us and he said, and I quote 'climate change in the Murray Darling is reproducing the fate of the Tigris and Euphrates several thousand years ago when the river waves evaporated in today's Iraqi deserts'. Well Ross, that's a vivid way to open a book which might otherwise have been, for some people, a little dry, a little challenging, grappling with the policy and particularly the economic challenges.
Professor Ross Garnaut: Well it was a gripping scene that we experienced up the Darling. It's country that Jane and I have visited before. It was where her dad grew up, on the lower Darling, and beautiful country, those majestic river gums on both banks, but normally or in other times water between now, but now white sand beneath with an occasional stagnant pool with a big skeleton of a Murray Cod alongside the stagnant pool where it had been ravished by wild pigs who were able to capture the survivor of 80 summers and a dozen droughts.
So that was in my mind as I wrote that introductory chapter.
Carr: And you're careful when you talk about that, to say there have been conditions like this before, drought conditions before, but these conditions are becoming more frequent and more severe, which is a concept that we can apply to much of the evidence of climate change, like the bushfires for example.
Garnaut: Yes, and I of course have no background in the science of climate change, so I relied on the people who study these things, and in my 2008 report I reported on likely consequences of unmitigated climate change and regrettably the atmospheric physics of 2007 and 2008 was very sound and events were unfolding just as the best scientists of Australia and of the world were saying that it would.
Carr: You spoke very eloquently at the commemoration for the late Bob Hawke in the middle of the year, presided over by Craig Emerson who is with us tonight, a friend and advisor to Hawke and later a minister. I remember the - that was on a Friday, I remember the Saturday after I was at lunchtime with the former Victorian Premier Steve Bracks and we went into that Sri Lankan restaurant just off William Street and we bumped into you and we congratulated you on your commemoration to Hawke.
By the way you praised Hawke for among other things his commitment to evidence-based policy. You look at the evidence. You form a policy. And he used Cabinet, Cabinet processes to get at that policy. But you had one message for Bracks and me, you said Australia can get to that 45 per cent reduction in emissions by 2030 by allowing the pricing and investment decision to continue to move forward, and that was a very optimistic message and for someone now working in the area of business and climate, it was almost a credo for me and I've been quoting it in every speech I've given since. Please tell me, tell me you, I'm not paraphrasing you, I haven't overstated the case and you still think that we could get there.
Garnaut: Well I said that to you and to Steve Bob because I'd seen stuff in the paper about you backtracking from it, and the Labor Party had just been through that cruel election result and some people were saying that it was, the outcome was partly the consequence of having gone too far on climate. I was firmly of the view, and I've continue to follow these things very closely, that the Labor Party targets were not difficult to meet. In fact they would be met along the way of implementing what was in the best interests of the Australian economy. So it didn't require an impossible effort or even a difficult effort.
Yes that is true and it's true even though we're now bound to live with policies that are not supportive of the climate transition, at least at the federal level, and I would not have thought this likely, this outcome likely when I did my first report or my second one. What has changed is that it's become much less costly to make the transition, especially in this country with our exceptional endowments of renewable energy and opportunities for capturing carbon in the landscape.
Carr: Let's just underline that, this goal you see as being feasible because the cost of implementing it has fallen dramatically since you grappled with the issue in the 2008 report.
Garnaut: Yes, and I can't hide from my errors, because I wrote 696 pages embodying the very detailed modelling that I did. The first climate change review was commissioned by the states with an invitation for the Commonwealth to join. The Commonwealth joined when Kevin Rudd became Prime Minister at the end of 2007. So I was working with all the resources of the treasuries as it happened of Victoria and Queensland and the Commonwealth Treasury and the best academic modelling groups in Australia and we did the most detailed far dated, long-dated modelling of the Australian economy that's been attempted before then or since. When you do that sort of modelling you've got to make your explicit assumptions about what's going to happen to various costs.
Our group consulted with the best people working on technology and science and also making the equipment for renewable energy and in Australia, in Japan, in Korea, in China, in Germany and Britain, in the United States, and we wrote into all of the modelling an expectation that the cost for a couple of decades of solar power would fall by a few per cent per annum. Well in fact in the decade after we put that work to bed costs fell by 85 per cent, so very much more rapidly than we, doing our best on the best advice, presumed at the time.
Carr: And a bonus as well, as an economist, you were fully able to capture this, the fall - and you say it was going to be long-term fall - in the cost of mining and interest rates.
Garnaut: That's an historic change that makes a lot of difference to a lot of things. It's a change that I talked about in my book Dog Days, published in 2013, where I foresaw that a half a dozen years of bumping along the bottom and no growth in incomes, which sadly we have experienced, but there's been a bit change in the relationship between savings and income and investment and income in the world as a whole; a tendency for people to save more and invest less, which has led to capital markets pricing capital more cheaply, and a reduction in real interest rates.
After, now seven or eight years of steady economic growth in the United States and unemployment at historically low levels, real interest rates set in the markets, not by central banks, 10 year bonds, 20 year bonds, real interest rates of approximately zero and that has a huge effect on the cost of the energy transition, because nearly all of the costs of renewable energy and storage of energy are capital. The cost of fossil energy or electricity from fossil energy is, to a considerable extent the cost of mining year-by-year the coal or the natural gas. The operating costs are a very high proportion of total costs, but for renewable energy the costs are overwhelmingly the cost of capital, so a reduction of real interest rates to near zero greatly reduces the cost of renewable energy. That reduces the cost of the necessary transition. It improves the competitiveness of zero emissions energy relative to coal and gas-based energy.
Carr: There was one qualification you attached to your optimism though when you said to Bracks and me, we can get there, the country can get to a 45 per cent reduction in emissions by 2030, I think you thought about it for a moment then you quickly pressed the qualification - and again I hope I'm not misquoting you in paraphrasing - providing the government is not drawn to subsidise coal.
Garnaut: You're remembering it very accurately.
Carr: Thanks, because I've quoted that 100 times since and attributed it to you. I might have heard back from you if it had been a serious mistake.
Garnaut: Of course part of the story of the energy markets in recent years has been the overhanging risk that the government will subsidise coal. I notice that Jason Falinski, member for one of the Sydney electorates in the Federal Parliament, the Liberal Party, said in Q&A with me the other night that no, no, we would never think of that, but, well maybe I heard wrong or read wrong, but I have read statements attributed to the Minister for Resources and other leading figures of the government saying this was being contemplated. Well maybe I just heard and read wrong.
Carr: On Page 10 you say, quote, 'it will become clear throughout the 2020's that drawing 50 per cent of electricity from renewable sources is simply a milestone on the path to more comprehensive transformation'.
Carr: That's, that's powerful and it's optimistic, but I think the essence of your book is summarised with this sentence, and that's when you say - the advantage of the low carbon world are great for Australia. That if we're making, the whole globe is committed to this transformation, zero net emissions by 2050 that so many countries have committed to, this is going to be a world that offers great advantages to this carbon-based nation of ours.
Garnaut: and it's a little bit paradoxical because we are the world's biggest exporter of coal and the world's biggest exporter of LNG, as of this month, having I think surpassed Qatar and we've done well in incomes and jobs and export revenue from coal and gas, and from industries based on them. We've had advantages. Those advantages for a long time gave us relatively low-cost energy that supported energy-intensive industries. The aluminium industry that developed in Gladstone in Queensland, in Newcastle, in Portland in Victoria after Japan for environmental reasons effectively shut down its aluminium industry in the 80's.
So the energy and the coal and gas economy provided a lot of economic advantages for Australia, but these advantages were limited in their effects on the competitiveness of energy using industries because these commodities are tradable. A steelmaker in Kobe in Japan can get metallurgical coal from Newcastle or Mackay a bit more cheaply than Andrew Forrest seeking to turn his iron ore into steel could get it for use in the Pilbara in Western Australia.
We used to have very big advantages in the cost of natural gas when we didn't have an export industry. We had very cheap, the cheapest natural gas in the developed world and a lot of our manufacturing of plastics and petrochemicals - especially based in Melbourne Geelong and Adelaide - was based on that low-cost gas, but that advantage disappeared when we internationalised the gas market. We went from having gas prices one third of the United States to having gas prices three times the United States because the US adopted the opposite policy restricting exports of gas.
So we lost any advantage that we used to have through exporting, through our coal and LNG becoming part of a global market. Now I'm not against globalisation of energy markets, but the consequence was that we lost any competitive advantage from that source, but we won't lose the competitive advantage when renewable energy, zero emissions energy is everyone's source of energy, because we've got distinctively the world's best combinations of renewable energy. We've got the lowest cost wind and solar resources in the world, the best combinations. In southern Australia are particularly strong with wind exceptionally good, but a lot of the locations very good for solar. As you go north towards Capricorn the solar becomes as good as any in the world, and the wind is still not too bad. At the moment the growth of zero emissions energy in the world is wind and solar, so we've got the resources of, the energy sources that are important.
Later other sources of zero emissions energy will probably become more important in particular locations. These will include probably tidal and wave, and we've actually got exceptionally good resources for them as well. And we won't lose the competitive advantage in these renewable energy sources because these are not so readily exportable. You can build a high-voltage transmission line underwater and take it a long way. We've done that between Tasmania and Victoria. In today's Financial Review there was talk of doling that between Darwin and Singapore and between the Pilbara and Java, and that may very well happen.
Carr: You are a bit cautious about that, because on Page 110 you say renewable energy, renewable energy can be traded internationally, only at high-cost…
Garnaut: That's right.
Carr: …It is a precautionary warning, saying international transmission of electricity from Australia would cost much more than the electricity itself. Your argument is that the renewables offer colossal savings used on Australian soil.
Garnaut: Yes and that's the point. Whereas metallurgical coal is no more expensive if you use it in Kobe than if you use it in Australia. Australian renewable energy will be much more expensive if you use it in Kobe or in Singapore.
Carr: So what did you tell Michael Cannon-Brookes when you had dinner with him last night? Did you warn him to be careful about his economics as he proposes this, this high-voltage line from northern Australia to Singapore?
Garnaut: Well he's just committed to a $15 billion investment and I am all in favour of giving it a go, and I think, and I think that will be part of the future, but the bigger opportunity for Australia is to use that at home. There's two main ways that you can transport renewable energy internationally. One is a high-voltage cable, very expensive, probably costs probably half the value of the electricity in Java or in Singapore is the cost of the cable. So it's half the cost if you use it here. The other vehicle is hydrogen, either using renewable energy to make hydrogen and either liquefying it and exporting it like we export LNG, or turning it into ammonia where you don't have to liquefy it. You've got another process with more costs but it's cheaper to transport.
Well hydrogen's hard to liquefy, harder than LNG. It doesn't liquefy until nearly absolute zero. Absolute zero is the point at which electrons stop vibrating. Chief Scientist Alan Finkel told me that about six months ago and it takes a hell of a lot of pressure to get anywhere near absolute zero and so you use half the energy in the hydrogen to liquefy it. Hydrogen is the smallest of molecules - H2 and H of course the smallest of atoms and it seeps out between the molecules of steel and so you've got to have special containers, special materials to contain it and it's expensive to transport.
So it just won't be economic to take Australian hydrogen to Japan and Australian iron ore to Japan and then to turn it into iron metal there. It'll be much cheaper to do it here. So the advantages of having low-cost energy are going to be much more important as an advantage for industrial activity in the zero emissions economy than it was in the fossil energy economy.
Carr: So you give one example of it and that is that what happens here on Australian soil as the world moves closer to insisting on zero emissions steel. So we witnessed the loss of our steel industry in recent decades. I was Premier when Integrated Steelmaking ended in Newcastle and it was a trauma for the Hunter and for the whole state, but you see an opportunity for steelmaking, you say on a 'immense scale' in the Pilbara, in the upper Spencer Gulf. You see iron production migrating to Australia from industrial Asia because Korea and Japan have got a weak endowment of renewable energy resources, and we could even get a proportion of Chinese capacity, even though China's got colossal renewables. But I just wonder, I just wonder what scale of an environmental catastrophe it would take to see Japan and Korea and to some extent China get out of steelmaking and to allow those industries to migrate to Australia because we can do it with renewables.
Garnaut: Well we're talking about the early stages of steelmaking, not turning it into machine goods or Mercedes Benz's…
Garnaut: …and so Germany keeps all that value-added and Japan keeps all the value-added of a Komatsu truck and a Toyota car, and it will be difficult for them to remain competitive for the later stage still making - if they have to make zero emissions iron with their own resources.
I chair an institution called the Australian Germany Energy Transition Hub which a number of Australian university - based at Melbourne - a number of Australian universities are a part of and five major universities and research institutes in Germany, with very close interaction with German industry and German government and it's really interesting interacting with Europe on these issues because there it's not argued. It's just understood that they will have to be operating with zero emissions in a couple of decades time. They expect European policy to require it, and by Europe I can include the UK in this, whatever is happening in Brexit, because British thinking is similar to Continental European thinking on this matter. So their mind is going to well how do, how do we remain competitive in all those metal products, downstream products? They know that they will reach limits of turning their own renewable energy resources into a base for industry. They're already reaching limits in Germany on the land that people will tolerate to be used for solar and wind. They're going to have to import a lot more energy, and they look around the world and they can see that for the low-cost way of importing iron or aluminium or silicon for their computing industries and photovoltaic panel industries, may very well be the import of materials made with renewable energy in Australia.
In the case of iron, Australia is by far the biggest exporter of iron oxide, iron ore for the world steel industry. China makes half of the world's steel and Australia supplies 70 per cent of China's iron ore. The quantities here are immense. Global steelmaking is responsible for seven per cent of global emissions and Australian iron ore - not responsible for, won't use that word - but generates three per cent of global emissions, so that's nearly three times as much as the emissions of everything we do in Australia when coal is added to it. Somewhere in the world that iron oxide is going to be turned into iron metal through a zero emissions process and from what we know now, the low-cost path will be the use of hydrogen which can be made from renewable energy. The exhaust from reduction of iron oxide using H2O is water, whereas the exhaust from using coal is CO2 and we can do with a little bit more water in our atmosphere, unfortunately it won't be all that much, but…
Carr: These are strong commitments by Germany and Japan. They're taking, reaching zero emissions so seriously that you think there's a chance of them relocating basic steelmaking to Australia with its renewables where it will be a zero emissions process. I'd love to have an evening without mentioning Donald Trump, but are you a bit worried that with America walking out of Paris in November next year, a lot of the world - Japan, Europe - might think - China - why should we make sacrifices in adhering to these Paris targets? They do involve a lot of hard decisions, restructuring and the rest, when the United States, the world's biggest economy, is just saying we're out of it.
Garnaut: Well I’m worried about American policy under Trump for what it might do to the global commitment on climate change. I'm even more worried on the climate change issue for what they're doing to the trading system, because the other way that Germany or Japan may deal with the problem is to say, okay it will cost a lot for us to use very expensive low-quality renewable resources here to make iron and steel and we'll just keep imports of anything that uses iron and steel out, and this is already coming up in discussions with European industry and European governments, the idea of a border tax on imports from countries which don't have strong climate policies. The idea there is that if a German steelmaker is required to have zero emissions in steel, that if someone tries to bring in a product with steel in it, that's been made with high emissions, then there'll be a tax at the border.
The answer to that, four years ago would have been well that's inconsistent with the international community's commitments on free trade under the WTO. What they say now, and I heard it in a conference with our German colleagues a couple of months ago, is Donald Trump's blown up the WTO, so we can do what's best for climate now and that will be a border tax. So if that was done in a way that systematically favour low emissions imports of iron over high emissions, that would be all right for us, but the trouble with protectionism it's become very political and pretty crude and pretty soon there'd some German interest saying oh well let's not take a risk on steel from anywhere and it becomes a general protection. That would make the world effort on moving to zero emissions much harder. We need global commitment on the goal of zero emissions by the middle of the century and no later, but we also need open trade globally if we're going to make this at reasonable cost.
Carr: Let me just test you on the proposition of Australia as an energy superpower in a post-carbon world. I'll throw a word out there. You give me one or two sentences to explain what the word might mean in that equation. So let's begin with ammonia.
Garnaut: Ammonia is a very important commodity in world agriculture and world trade. Now some of the consequence of using large amounts of it are actually ecologically a bit unfortunate, but it's been an import - nitrogen fertilisers have been an important part of the growth of agricultural output around the world in the past 50 years, well I suppose the last 100 years since Haber and Bosch in Germany invented the process to capture nitrogen in a chemical that can be put in the ground for fertilisers.
The other big use of ammonia is explosives. We're a big user of that in our mines. About 16.5 million tons a year traded, exported of ammonia. At the moment ammonia is one of the most - ammonia production, one of the most emissions intensive industries. You take natural gas, or you could take coal, originally in Europe you used coal, but now it's more natural gas. You extract the carbon, the carbon monoxide from the hydrocarbon of the coal or gas. You combine that with the nitrogen in the atmosphere under great heat and pressure using a lot of energy and you release carbon dioxide into the atmosphere and embody the nitrogen in a compound. It can be ammonia. It can be taken another stage into urea, another compound.
This is a big industry globally. We've got some of it in Australia, based on gas and coal, but you can make ammonia through renewable processes. There's two essential ingredients. You need hydrogen, which you can make from gas and release carbon dioxide or you can make hydrogen by running electricity through water, splitting it into the hydrogen and the oxygen and releasing the oxygen, that does no damage and then taking the hydrogen, combining that with nitrogen from the atmosphere under heat and pressure and the heat and pressure can come from renewable energy. So you've got zero emissions ammonia and that can be used in agriculture, for explosives. It's a big commodity [inaudible].
Carr: So a new industry for Australia?
Garnaut: Well we've got some ammonia now based on gas, but renewable - and it's an industry where we'll have distinctive advantages whereas we don't have special advantages in today's world.
Carr: No. Hydrogen.
Garnaut: Hydrogen is a source of energy. You can use hydrogen in place of natural gas for all the things that the natural gas does for energy. You can transport it through pipes and into people's homes. Electricity might be cheaper than doing that, but you can use hydrogen. You can use it instead of gas for peaking power generation for when - if you've got a lot of solar and wind, for when the sun's not shining enough and the wind's not blowing enough, you can use the peaking hydrogen instead of peaking gas. But you can also use its chemical properties to reduce metals, and I've given the big example, steel is the big industrial source of carbon dioxide emissions and hydrogen can replace coke, it can replace coal in taking the oxygen atoms out of iron.
There's been more discussion in Australia so far in Alan Finkel's important work on building the hydrogen economy - our Chief Scientist, he's done a report and he's building another report on that. A lot of the state governments have taken that up, hydrogen strategies. There's been more focus on hydrogen as a source of energy, I think more transformatively important for Australia will be as a, for its chemical properties, including as the element that takes the oxygen out of iron oxide to make iron.
Carr: Okay. Biomass.
Garnaut: All of our chemical industries, all of our petrochemical industries, our plastics industries, a lot of our materials industries are based on oil, gas or coal, the hydrocarbon properties, the combinations of carbon and hydrogen in those fossil deposits are then used as a base for manufacturing. It's the chemical properties that are used. Now, the normal industrial processes release large amounts of carbon dioxide. If you want to still have products that serve the purposes of plastics and a wide range of other chemical manufacturers, you need to start with a hydrocarbon.
Now what coal and oil and gas are, are the remnants of plants, mostly plants, but plants and animals, organic creatures that live billions of, or hundreds of millions of years ago and we can short circuit that process and take material from plants that are living now, and that's what biomass is. It's the living hydrocarbons that processed in a slightly different way can form a base for the same sorts of chemical industries that coal and gas are now the base of.
Carr: One part of that I think - I think this is the correct way of putting it, is something that this university's got a specialty in, and I was briefed yesterday from Peter Ralph, a Professor of Science here, about microalgae and it sounds very exciting. You mention algae in three spaces in the book, because when he was briefing me we rifled the tome, and the focus is microalgae and the US has a number of algae farms making Omega 3 food supplements.
Carr: But microalgae as a basis for producing, as a substitute for the carbon currently used to produce plastics or clothing or protein sounds very exciting.
Garnaut: and it's using recently living plants rather than plants that lived hundreds of millions of years ago and we're extracting the same chemical properties. Algae is really interesting. Now, I don't talk as much about them in this - in Chapter 7 of this book because it was on the correspondent, is in the corresponding chapters of the previous book, and that's not because I downgrade the importance of that. I actually say more about land-based carbon opportunities and biomass opportunities in this book.
But algae has got some remarkable properties. First of all it's the original source of negative emissions. This earth was formed with a carbonic atmosphere in which life like us had no chance of living, but lots of carbon dioxide and no oxygen and algae got to work and over hundreds of millions - one of my biochemist colleagues, when I said hundreds of millions, said or billions - of years it took the - through the process of photosynthesis, sunlight and absorption of carbon from the atmosphere, turned it into a hydrocarbon, released the oxygen into the air. Captured the carbon from carbon dioxide, released the oxygen and that created the oxygen rich atmosphere in which mammals can live.
Algae does that more efficiently than any other plant. It's the original source of photosynthesis. It existed before any land-based plants, and the data I've seen suggests that it's eight times as efficient in converting sunlight into hydrocarbons as any land-based plant. It's got a long track record. It's good at it. It's proven it can do it and the challenge will be to harvest it from salt water at low-cost. A lot of the research is going into ways of harvesting.
Carr: Now your book bursts with discussion of these ideas. There's also a big serious chapter on what we need to do to fix up our electricity system. You call it the electricity transformation. The challenge seems to be that we've got all this renewable capacity, but it's testing the resilience of the grid.
Carr: I even speculate that you could have a consensus industry policy, a consensus climate policy emerge in Canberra with both sides competing with ideas to render more resilient, more robust the grid. To get all these renewables diversely located across Australia - the wind and the solar, industrial strength - to get them to the consumers. You've got lots of ideas for fixing up the grid for transforming interconnectors, batteries, and all the rest. What do you think though, not of the technical arguments, but the fact that the possibility that this could now be the debate surging renewables coming down in price dramatically? We really need Canberra to come out with competing ideas for seeing we've got a grid that can get them to customers, store them as required, get them between the states. 13
Garnaut: Well just at the moment that looks a dream, but as you see in the book I'm taking it seriously. I think we've got some, an example, South Australia. South Australia, the Labor Government there of Jay Wetherill had an objective of having 50 per cent renewable energy by 2025. Now they made rapid progress on that, not so much because of policy, although they were favourably inclined in regulatory ways to the industry, so it made it easy and that helped, but the big reasons why South Australia moved much faster than other states was - you had the same incentives from the Commonwealth, the renewable energy target, and for a couple of years carbon pricing exactly the same in every state, but South Australia have much weaker, much more expensive lower quality coal than New South Wales, Victoria and Queensland, and so the old energy economy was more expensive and less secure in South Australia, for that reason.
Also, the combinations of solar and wind are pretty good in South Australia -better than Sydney and Melbourne - and so the old energy was more expensive than the other states and less reliable. Also at the end of the grid it doesn't help reliability. The new energy was better in South Australia than in most, than in the heavily settled parts of New South Wales and Victoria, and so things went very quickly. You had that, an event I discuss in the book, the extraordinary episode of the blackout, the state-wide blackout due to an extreme weather event in 2016 - September 2016. One could interpret what happened in a different way. You had a cyclonic event in a non-cyclonic state, unprecedented weather event, unprecedented severity of lightning strikes which took out a lot of the infrastructure; stronger winds than you'd ever had which knocked down 23 transmission towers, but that did lead to, in a cascading effect, to the collapse of the power system. It took hours to get it going again in Adelaide and in the outlying areas, the Eyre Peninsua, it took days. It was a very serious episode.
Now that need not have happened. It happened in South Australia I think because the regulatory agencies that were set up when we created the national energy market - you were probably part of it…
Garnaut: …but the states used to have complete responsibility in these areas and they ceded responsibility to a federal body, COAG, which chaired by the Commonwealth but with the states participating there, and the regulatory agencies never took seriously the many adjustments that have to be made to make the system work when you have a high proportion of renewable energy. They did not look to the future. Well the blackout led to looking to the future. The South Australian Government responded very quickly. We got the big battery as a result of that, and a number of other adjustments. As a result of that South Australia now has more secure power than New South Wales and Victoria and for the first time ever, on a consistent basis, it's a bit cheaper than Victorian power. At first the Coalition attacked the Labor Government for that, but what has happened since the Marshall Government came in, they've embraced it and…
Carr: You have a Coalition Government in South Australia as the apostle for renewable power.
Garnaut: They are proud of it, and in two important ways, have extended the policies supporting it. So there you do have an example of once people realise the extent of the opportunity, you did get the two major political parties competing for who could manage this transition best.
Carr: One part of it should be greater demand management, and that's an area where the Institute of Sustainable Futures has developed a considerable specialty, yet you'd endorse the notion that we can do a whole lot more in managing demand in a way that relieves pressure on the rather stressed grid.
Garnaut: Yes, it's an under-developed area in Australia and with immense opportunities, and it's relevant at the household and small business level as well as at the big industrial level. The costs, most of the costs of the grid are just service demand for a few hours a year, and those high peaks on a hot summer's afternoon when everyone comes home and turns their air conditioning on. Similarly a lot of the generation capacity is there to service limited peaks. So if you can provide incentives for people to use less power at the peaks, or at least draw less power from the grid at the peaks, you can greatly reduce the cost to the system. You can do that with household or small business batteries, so that - filling up with solar during the day and then running off the battery during the peak periods.
The electric car provides a huge opportunity for that, so long as you provide the incentives for people to plug in at off-peak times. Of course you make the problem worse if you provide no incentives to take demand away from the peak. People will come home from work and plug in the electric car at the same time as they turn on the air conditioner. That would make things worse, but it could be made a lot better.
At the industrial level there's immense opportunities. Ten to 12 per cent of the electricity used in New South Wales, Queensland and Victoria is in big aluminium smelters. Well you can turn them off for an hour in 20, even with current technology, without damaging them…
Carr: Big contribution to demand management.
Garnaut: …and that is a big contribution, but with engineering with demand management in mind, you can extend the amount of time where they can operate at less than full capacity. Hydrogen's got a very big role in demand management. If hydrogen becomes a big source of demand, an electrolyser can turn off like that, in a millisecond, and you just leave it off for as long as the grid is under stress. So the development of hydrogen is going to be, to make an important contribution to demand management.
Carr: Percy Allan, the former head of New South Wales Treasury had something to say on behalf of himself and colleagues in the last few days on Australia's disappointing performance with evidence-based policy, a point you made in your earlier book. Can we really say that we're a smart people, smart nation? Is it getting, is the evidence getting a bit frayed for us to be able to make that kind of boast?
Garnaut: Well if we were genetically of below average intelligence then we would have always been underperforming, and we haven't always underperformed. We're underperforming at the moment…
Garnaut: …but we've had our good points, and I suppose I had the unusual good fortune of working closely with Bob Hawke, but I think that period of government showed that we need not be dumb.
Carr: Two nights ago here in the Great Hall we had a discussion with Martin Parkinson, senior public servant, being asked questions by Marion Wilkinson, an author and journalist, and we ended up pretty depressed because we were dealing with the failure of attempts over 10 years, well to implement the Garnaut Climate Report, to have a trading system that simply, elegantly put a price on carbon and saw the transformation take place incrementally, but fairly rapidly. You're giving us a more positive message tonight. You're talking about the prospect that this country could be a super power in the post-carbon world. So on the bottom line, answer candidly, are you today an optimist or a pessimist?
Garnaut: I think there's immense opportunity. It's there for us to grasp. We would have to make, continue to make mistakes of the magnitude of the last six years.
Carr: To get this wrong.
Garnaut: To get this wrong.
Garnaut: Not to be the super power. The prize is Australian employment growth, high employment, rising incomes instead of the stagnant incomes we've had for the last half dozen years. We're still a democratic political system. There's lots of corruption of our communication systems and our media, but despite all that I think our democracy is still capable of choosing an outcome that is overwhelmingly better for Australians than the alternative, nd that's the question. Am I optimistic about the Australian democracy allowing Australians to choose something that's demonstrably better for them, not only for the environmental and climate reasons, but economically? Yes I am an optimist on that, but I don't think it's certain. I think it is possible we could still muck it up.
Carr: Okay. Well that's a good note on which to invite your questions. They've got to be questions. We don't want statements. We don't want declarations of faith or belief. Ask a question of Ross. It's too precious an opportunity to muck up. The microphone is coming down here to the second row from the front. You're first sir, with your hand up.
Question: Thanks Ross. It's a very optimistic outlook and a great opportunity as you say. Could you just explain to us the impacts that you think these opportunities might have on regional and rural Australia, especially the industrial transformation opportunities that you discuss in a low-carbon energy scenario, but also something you haven't talked about here but do in the book, about carbon farming and the agricultural sector?
Garnaut: Well it's a characteristic of the post-carbon economy in which Australia could do very well, that disproportionately the opportunities are in rural and provincial Australia. I say that the places where it's most likely to start, places which will have advantages will be some of the nodes of the transmission system built under the coal-based generation. Cities like Gladstone and Newcastle, from which radiate transmission systems out to large states, but also something similar in the Latrobe Valley and Portland in Victoria, although you don't have a great port there, so that's a disadvantage. Similar in Collie in Western Australia. Similar in the upper Spencer Gulf, Whyalla and Port Augusta in South Australia.
You can get this process started by using those transmission systems to bring low-cost renewable energy back in, and so there will be some advantages in those centres. So that's a first opportunity in provincial Australia, and one that's politically very important obviously, because if people in those regions see there's an alternative future they will have a different attitude to it. Over time we will develop new centres close to the high-quality renewables and close to the minerals that require processing and that will be overwhelmingly in rural and provincial Australia.
But I'm glad you brought up the question of carbon, use of biomass and sequestering carbon on the landscape. Here Australia's advantages in this area are similarly large to those in renewable energy. Bob's mentioned algae, but just on the land-based opportunities the world will be making a whole range of chemical manufactures from biomass, and we have by far the world's richest endowment of woodlands per capita. Economists think in terms of comparative advantage, a resource relative to the size of the economy and the population, and we're very richly endowed with woodlands. No country comparably endowed.
A lot of our woodlands are in country where there are not high-value competing agricultural uses. If you try to take farmland into production of biomass from the Perry's of the United States, you're taking out of production high-value agricultural land that creates a problem for American, and to some extent global food supplies. Well you don't have that problem if you manage better the woodlands of rural and provincial Australia. It's been my privilege to have had quite a lot of contact recently with the leaders of Indigenous Business Australia, responsible for managing over a million square kilometres of country, a lot of this being this semi-arid woodland. It would not be very hard to manage that land in a different way, accreting a ton and more, much more probably of carbon in woodland per annum.
That 100 million square kilometres, 100 million hectares, at the minimal level of a ton a hectare a year, you're talking about 100 million tons, the price of carbon credits in the European market at the moment is over $40 a ton. Their carbon price nearly twice as high as the old Australian carbon price is nearly $40 a ton. Establish the trading arrangements with Europe and that requires establishing with the Europeans again that we're a legitimate trading partner. They had accepted that and we would have been part of the European trading system as from 1 July 2014 if the old system had stayed in place. That would be worth $4 billion a year just on one element of that carbon accretion; not talking about carbon in soils. Carbon in soils is huge.
In the late in life game I've been in and learning about climate change in the last 11 years after a lifetime in more conventional economics, you keep learning things. One of the things I've learnt over the last year I put in the book is that in the top two metres of soil in the earth's crust there's more carbon than in the whole of the atmosphere plus the whole of the biomass, the living plants and animals on earth. So if you can manage the soils a different way, and you can, to increase by a modest proportion the carbon in the soils, that will suck a very large amount from an atmosphere.
We've got huge opportunities for that through regenerative farming. Many farmers in Australia are starting to do that. They need to be rewarded. The Carbon Farming Initiative which was part of the old emissions trading scheme and was kept alive by Tony Abbott's Emissions Reduction Fund and it's been given another $2 billion before the last election with a name change by Prime Minister Morrison, to the Climate Solutions Fund, but that keeps going at a modest scale, the opportunity for selling credits, in this case to the government, to unlock the whole opportunity it will need to be part of a larger opportunity. But by definition these are opportunities for rural and provincial Australia. They are of immense scale compared with the incomes generated by traditional farming and pastoral activities.
Carr: There's a question over here.
Question: Mr Garnaut I'm a member of Young Labor. We have a record of building future state and federal leaders; I think you're sitting next to one of them. As future potential leaders what can we do to steer the debate back in favour of evidence-based policy, particularly on climate change?
Garnaut: This is a really, this question raises really fundamental issues about our democracy and I don't think the answers lie in climate change policy. I think the answers lie in getting the money out of politics. I was part of meetings of the New South Wales Parliament House and Victorian Parliament House discussing these issues a couple of years ago. I don't think that knowledge as a basis for policy will be given its proper place unless we can ban donations to political parties and for political campaigns.
Garnaut: I would ban all donations except for Australian citizens who are on the Electoral Roll and set a reasonable limit for individual contributions. It can be, you can argue about what that limit should be, but I think that's the most important reform. I think a second and very important reform is to restore the quality and integrity of public interest journalism and I don't - and the base for the quality newspapers, the financial base, has been destroyed by the internet with more than 90 per cent of the revenues that used to come through classifieds and other advertising now going to the internet-based information sources which don't support quality journalism.
I think we've got to recognise that public interest journalism in a public good warranting public support, and you have to obviously have mechanisms that insulate the allocation of funds from the partisan political process, but that's the second fundamental reform to restore the role of knowledge in Australian policy making.
Carr: Another question. Yes.
Question: Thanks very much Ross. Could I ask two questions, one about the medium to long-term future for our gas export industry and does it have a, you know how sustainable is it? Secondly, if we've passed a tipping point on, in terms of growth in renewable energy production in Australia, in what decade or five year period do you think we might start to see significant progress with the sort of industrial development, the new industrial development and renovation of industrial processes that you've talked about? I know you're involved with Whyalla, but when do you think we might see some very large new projects come on-stream?
Garnaut: What decade? I would hope the 2020's, very large. If we don't make this transformation work then by the end of the 2020's there will be no aluminium smelting in Gladstone, Newcastle or Portland and that will probably be blamed on renewable energy, but if we get this right there's always a big advantage on building on something that's already there. You've got infrastructure, you've got ports, you've got handling facilities, you've got trained workers. If we get this right - and we could have it right in time to save even the Portland smelter which has only got a few years to run as a coal-based facility - then you'd not only have those plants surviving but they would expand and other plants would be built in other places. But there's no reason why this can't move at a considerable pace and considerable scale from early in the 2020's. I'll be disappointed if it doesn't. You've asked if I'm an optimist. I will feel that my views have been disappointed if we're not making progress early in the 2020's.
On gas, there's no long-term future for gas or coal or oil unless we can capture and sequester the carbon emissions from their use. To meet the Paris objectives the world as a whole will have to have zero net emissions by 2050. Because we're a bit slow in getting started we'll be using more of our carbon budget early, so probably when leaders are reassessing the Paris objectives in 2030 the conclusion will be we have to bring forward by a few years the zero emissions.
The international community has agreed and we're part of that, we've signed onto it, at Paris when Tony Abbott was Prime Minister, to developed countries getting there before developing countries; moving ahead of the rest. Most of our gas goes to other countries, so it's what China and Japan and Korea and India does about the use of coal and gas that has the biggest effect on our production, rather than what we do ourselves. If those countries meet their Paris objectives, play their part in the world meeting its Paris objectives then they won't be using coal or gas in the middle of the century, unless we've made carbon capture and storage work.
Now it's easier to capture emissions from gas than from coal because the processing of the gas before liquefaction you take out the methane, what you want to transport to Japan or China and liquefy it and you're left with carbon dioxide, and the carbon dioxide content can be low or high, and because it's a fairly concentrated carbon dioxide is fairly easy to re-inject that at a fairly low-cost at source and will often go back and stay in the geological structures from which it came. So that end of the carbon capture is relatively easy. At the other end, it's also easier to capture carbon dioxide from gas combustion than from coal combustion, for various reasons, and so if you've got good geological structures where the gas is being used in China or Korea or Japan, then there may be opportunities for efficient capture and storage.
Regrettably the coal and the gas industries in Australia have not faced up to the reality of the world's need to move to zero emissions so they haven't invested in carbon capture and storage and it will be unfortunate if this is the case, but it may turn out to be the case, that we will never learn whether it could have been economically viable because Australian coal and gas companies have not taken climate change seriously and therefore have not invested in the research development and commercialisation that would have been necessary to make CCS competitive with other zero emissions forms of energy.
Carr: Ross, thank you very much indeed. It's my honour now to call on Verity Firth who is the Executive Director Social Justice at UTS to thank you on behalf of all of us for your attendance tonight, but more than that, your application to public service over a long career in Australia.
Verity Firth, Executive Director Social Justice at UTS: Thank you very much, and I think I speak for everyone here to say that that was a wonderful conversation and one that's definitely delivered me with a sense of optimism at the end of the day.
I did want to say a few remarks, and I'm saying some optimistic remarks, because I think after a day like today we all need a bit of optimism in our life when it comes to climate change. Bob and Ross talked about the opening of Ross's book where he describes a journey with his wife through the Murray Darling Basin in August 2019. He describes the landscape ravaged by drought and in the opening chapter he meditates on the fact that all that he was seeing and experiencing was actually predicted to occur and did in fact occur.
But what I wanted to say tonight is I think that opening with a story that describes an evocative and personal experience of climate change is a really important way to start this book and it's important because of a range of reasons about the politics of climate change. Bruno Latour, in Down To Earth, talks about the need to bring the politics and science of climate change back from what he terms nature as universe to nature as process. His argument is that we all intimately understand and have a sense of connection to the land. Sometimes it presents itself as a nostalgia for our childhood, bushwalks with mum and dad, digging in the dirt, playing in a creek, we all talk about the weather. We can all see the impacts of climate change happening all around us, whether or not we recognise then as such.
Latour talks about a loss of trust in science being driven by the sense that people feel that they can't contribute meaningfully to a conversation that requires the 21 intermediary of instruments, models and calculations. However everyone can contribute to, can contribute to a conversation about the weather and the climate and it is this deep human understanding and intimacy to our earth - which is what Latour talks about when he talks about nature as process - it's this understanding that can help drive a collective responsibility to do something about the impact of climate change.
It's this understanding that Katharine Murphy alluded to in her very fiery opinion piece in last weekend's Guardian. I don't know if anybody else saw that, but I just loved it - where she lambasted, like absolutely ripped into our nation's conservative politicians for refusing to talk about climate change during the bushfire emergency. You know, although we speak about the root causes of terrorist attacks, both during and after, although we speak about the root causes of planes falling out of the sky both during and after these accidents, we're not allowed to speak about climate change as bushfire rages.
The reason, according to Katharine Murphy, is that the government 'does not want its record rake over at a time when Australians are feeling deeply anxious, because it's hard to control the narrative in those conditions'. The government does not want people who are particularly, who are not particularly engaged in politics switching onto this issue at a time where they have a personal stake in the conversation. In other words, governments want to keep discussion around the science of climate change in the hands of the elites so that they can continue to attack this science as elitist. They do not want the science of climate change made real by the lived experience of ordinary people, because it's that that could be dangerous.
Climate change is terrifying and this terror is partly what drives human beings inaction in many ways, but I do firmly believe that this change is now going to happen and one of the things that gave me probably the best hope I've had in years on this issue was going and joining the student climate strikes at Balmain earlier this year, at the Domain. It gave me such hope - partly because it was just full of young people - it gave me such hope because the Domain was packed in a way that I had not seen probably since the early 80's and the big anti-nuclear movement. So this real genuine emergency and I at last started to see the tipping point if you want to talk about it in terms of political action and increasingly I genuinely believe the personal and lived experience of climate change impact will drive political energy and will drive rage over this issue.
So it may take a while for the governments to respond, but I actually think now the people are going to take things into their own hands, and what I really love about listening to Bob and Ross tonight was that there are so many ways we can take this into our own hands. There are so many things happening already in industry, in policy making, that can help drive this change, no matter what, even if the government are dragging its footsteps.
So, thank you to Stuart White, thank you to ISF for hosting us tonight. I think it was a really engaging experience. ISF is sort of one of the great things about UTS actually, having this institute that's dedicated to sustainable futures and engaging with the outside world. Thank you to Professor Bob Carr. We're so lucky at UTS to have someone with your experience, and government experience, which enables that precious connection between university research and real world outcomes, and thank you to Ross Garnaut. I was a very…
Firth: I feel that applause. That was a nice one. I was a very, very young and inexperienced junior Assistant Minister for Climate Change and Environment in the Labor Government in New South Wales when, in 2008, when your climate policy review came out and I still remember I read it from beginning to end and I was absolutely mesmerised and blown away by the simplicity, really, of your arguments, and it absolutely impacted my politics in that portfolio and it has impacted me ever since. So it's really great having you here tonight.
Garnaut: Thank you.
Listen to the event
Welcome - Professor Stuart White
In Conversation - Professor Ross Garnaut with the Hon. Bob Carr
Closing Remarks - Verity Firth