Opportunities Beyond Carbon
Opportunities Beyond Carbon Looking Forward to a Sustainable World
Edited by John O’Brien
MELBOURNE UNIVERSITY PRESS An imprint of Melbourne University Publishing Limited 187 Grattan Street, Carlton, Victoria 3053, Australia
[email protected] www.mup.com.au First published 2009 Text © individual authors, 2009 Design and typography © Melbourne University Publishing Limited, 2009 This book is copyright. Apart from any use permitted under the Copyright Act 1968 and subsequent amendments, no part may be reproduced, stored in a retrieval system or transmitted by any means or process whatsoever without the prior written permission of the publishers. Every attempt has been made to locate the copyright holders for material quoted in this book. Any person or organisation that may have been overlooked or misattributed may contact the publisher. Text design by Phil Campbell Cover design by Phil Campbell Typeset by J & M Typesetting Printed by Griffin Press, South Australia National Library of Australia Cataloguing-in-Publication entry Opportunities beyond carbon / editor John O’Brien. 9780522856897 (pbk.) 9780522856910 (pdf.) Includes index. Bibliography Climatic changes. Global warming. Industries—Environmental aspects. Environmental policy Greenhouse effect, Atmospheric. Greenhouse gases—Environmental aspects. O’Brien, John. 363.73874
Contents Foreword Professor Sir David King Introduction
Part I: Setting the Scene 1
2
When Words Fail: Climate Change Activists Have Chosen a Magic Number Bill McKibben What Holds Us Back from the Big Shift? Time to Stop the Hand-Wringing and Start Envisioning What We Really Want Dr Sam Wells
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11
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Towards a Fossil Fuel–Free Future Professor Stephen Lincoln
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Communicating Complexity in the Carbon-Aware World Garth Lamb
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Part 2: Community Opportunities
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Building Better Communities Allan Tranter
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The Carbon Economy: A New Imperative for Acting Locally Maggie Hine
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Assumption Traps and a Future Vision Andrew Dickson
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Transport Opportunities: Towards a Resilient City Professor Peter Newman
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Part 3: Business Opportunities
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The Business Case for Going Beyond Carbon Dan Atkins and Nick Palousis
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The Cleantech Opportunity John O’Brien
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Water Industry Cleantech Solutions Joe Flynn
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Branding Beyond Carbon Fraser Bell
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Reasons to Be Cheerful Dave Sag
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Part 4: Investor Opportunities
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The Instrumentalisation of Carbon Tenke Zoltáni
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The Fund Manager’s Perspective Lisa Wade
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Coming into View: Environmental, Social and Governance Sustainability for Institutional Investors 190 Frances Magill and Nicholas Taylor
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Riding Out along the Clean Energy Efficient Frontier Mark Schneider
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Green Investing: Towards a Clean Energy Infrastructure Chris Greenwood
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Part 5: National Opportunities
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Building Australia as a Solar Nation The Hon Greg Hunt, MP
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Building Blocks for a Clean Future Kristin Alford
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Things Aren’t Always What They Seem: Jumping Hurdles to a Post-Carbon Lifestyle Tony Cutcliffe
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The Best Crisis We Ever Had! Stewart Taggart
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Pursuing Clean Energy Business in India: Overcoming Barriers, Finding Solutions Peter Castellas and Erin Kuo
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245 256
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Part 6: Global Opportunities
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Protecting Today, Promising Tomorrow Amanda McKenzie
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Student Visions of the Opportunities Beyond Carbon Joel Amos, Jack O’Brien and Lucas Lovell
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The Looming Peak Coal and Peak Phosphate Crises: Disaster or Opportunities for Innovation? Professor Barry Brook and Stewart Taggart
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Australia’s Emissions Contribution: Does It Matter? Dr Monica Oliphant
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The Way We Were: Looking Back from 2100 Dr John Wright
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Acknowledgements Contributors Selected Bibliography Index
340 342 350 352
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Foreword Professor Sir David King
As the colonists of North America extended their fingers west towards the Pacific and east to the Atlantic, that huge expanse of untamed territory became known as the land of opportunity. Land was plentiful and free for a while, but by 1900—even before the Union was complete—there was no land left to claim; it was already owned by someone. Australia is more than three-quarters the size of the United States but, unlike North America, still has vast areas of hostile and unclaimed wilderness. It also boasts huge natural resources—not least solar power and other renewable energy sources. With climate change now the greatest threat we face, and with carbon cuts worldwide the greatest challenge we have ever been set, Australia has become the new land of opportunity. There can never have been a more apt time to publish Opportunities Beyond Carbon. This year has seen the worst wildfires in Australia for more than 100 years—in Victoria—while floods have devastated land and livelihoods in New South Wales, Western Australia and Queensland. More than 200 people died in Victoria, and at one stage more than 60 per cent of Queensland was under water, the floods lasting
for over a month and costing more than $200 million. Climate change could well have been a significant factor in these tragic and costly disasters. Prime Minister Kevin Rudd came to power in 2007 on a wave of brave manifestos and pledges. Among them was the promise to make his country do its bit to tackle climate change. One of the first things he did was to sign the Kyoto treaty, binding Australia to greenhousegas cuts. Most developed countries had long since signed, and Australia, and even more significantly the United States, had stood out among those nations still sticking their heads in the sand. But lifting its head must only be the start for Australia, and Mr Rudd is under pressure to toughen his government’s policies on climate change, not least to try to prevent any repeats of the disasters Australia suffered earlier this year. And that is where Australia can seize perhaps its greatest opportunity. The world’s toughest problem ever could be, as Stewart Taggart says in his essay, the best crisis Australia ever had. It is the developing countries that will suffer first from the impacts of climate change; some already are. In global terms, some of them are not that far from the Australian coast. All 10 000 residents of the Tuvalu islands and atolls, midway between Australia and Hawaii, are at risk as sea levels rise. And two of the thirty-three islands of Kiribati, also in the Pacific, have already gone under, while others were flooded so badly in 2005 that farmland was destroyed, wells contaminated with sea water and homes and a hospital inundated. Opportunities Beyond Carbon points out that Australia, a much richer nation, is equally ripe for damage. Its dry climate and delicate coastline mean it will suffer more, and more quickly, than other developed countries. This book rightly suggests that businesses that take on board those threats, and grab the opportunities climate change presents, could become industry leaders. Those that do not will be left behind. The credit crunch could hamper plans to invest in renewables and other large-scale carbon-saving measures. In Britain, plans for large wind farms are at risk because of local planning difficulties. At the same time, there is relatively little government backing for carbon storage from coal burning despite coal being perhaps the cheapest
Foreword
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and most widely available energy source. No industry will invest without the backing of confident and determined government and a good policy on carbon-dioxide pricing. And so back to Australia, which can steal a march on the Poms by forging ahead with renewable developments. Australia emits just 1.2 per cent of the world’s carbon, according to data used in Monica Oliphant’s essay. Yet Monica also shows that 90 per cent of the globe’s 205 countries emit fewer emissions than Australia. We are all obliged to act—not least Australia—and Opportunities Beyond Carbon shows how Australia can do its bit to slow climate change by becoming a major exporter of clean-energy technology. If Australia does this, we may become the new land of opportunity.
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Foreword
Introduction By John O’Brien
This is an unashamedly optimistic book. It aims to serve as an antidote to the two contrasting types of mainstream coverage of climate change: the no-hope horror stories inciting paralysing terror, and the ‘happy ever after thanks to science’ approach offering an effortless solution. The continual coverage of melting ice sheets, rising sea levels, droughts, severe storms and crop failures is essential in providing a context for debate on climate change. Such stories make climate change real to the general public and highlight the importance of tackling it. However, the tone is often so cataclysmic, so intent on relishing predictions of upcoming disasters, that many people are left with a defeatist attitude. In this light, the problem appears too big and too far advanced. It seems as if we have passed the tipping-point, rendering all action pointless. Stories of wonderful inventions and developments that will ‘solve’ the climate-change problem are equally as damaging to the prospect of securing a better world. They allow their recipients to relax and dismiss cautionary news and opinion. To those accepting such stories, the problem appears insignificant in the face of mankind’s scientific innovation. It seems that no additional action is required.
This book takes a very different approach to the issue. A world ‘beyond carbon’ is not a lost cause, nor is climate change something that can be solved by a scientific silver bullet. Progress will only be truly achieved once entire communities—local, national and global— change their behaviours and adopt different ways of living. All communities need to implement changes now that will ensure avoidance of the most dire predictions of scientists. This is the negative aspect of climate change: alter behaviours or perish. Surprisingly perhaps, there is also a positive side. Climate change presents a unique opportunity for the introduction of behaviours, systems and technologies able to improve all aspects of life on Earth. Changes to atmospheric constituent proportions and the Earth’s physical attributes are not the only problems we face. There are many other aspects of human life, in both richer and poorer nations, that are far from optimum. In rich countries, increased wealth does not appear to correlate with increased happiness, bringing instead a general desire for bigger houses, more cars and more gadgets. In poorer countries, particularly, the attraction of urban communities with their promise of riches has led to an exodus from country areas, although the transition often fails to result in a better life. As the world community is going to make changes to its fundamental way of operating in order to reduce emissions—changes that will impact every activity and every choice—it would be foolish to ignore the opportunity to improve other outcomes as well. Representatives of all communities including governments, businesses, investor groups and industry networks should be asking themselves not simply, ‘How do we reduce emissions?’ but rather ‘What changes might we make in our community to provide the greatest opportunities to improve both our physical and social environments?’ The advantages of this broader approach may be seen when considering a theoretical review of one city’s vehicle emissions. When confronted with reducing such emissions, the relevant community faces change of some sort. A relatively quick and easy ‘solution’ would seem to be the creation of bus lanes throughout the city and its suburbs. Yet the need for change presents an ideal opportunity for the community and its leaders to question the whole structure of the
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environment in which they live. Is it easy and pleasant to walk or bike ride within and between suburbs? If not, what can be done to make it so? Town-planning philosophies that design suburbs that exclude industrial areas force residents to travel long distances to work—is it possible to create jobs nearer housing or vice versa? How might the urban transport system as a whole be a positive influence in strengthening the community? It does not take much imagination to see how the implementation of projects answering each question may result in both optimum emissions reduction and a healthier, happier, stronger and more connected community. Much benefit would be achieved if policy-makers created means of empowering their constituents, allowing innovation and the production of local solutions to local problems, and thereby enhancing social capital while protecting the environment. Once mankind’s contribution to climate change is accepted, the first step for many communities is a discussion on the means by which greenhouse-gas emissions can be discouraged. The main options are taxes, trading systems and regulations. Throughout the world this discussion has become a long, often hysterical, debate highlighting the complexity involved in introducing change to any community. Vested interests abound. In Australia, Europe and the United States, emissions-intensive industries have threatened mass redundancies, relocation of activities to ‘emissions friendly’ countries and blackouts as a result of the closure of local coal-fired power stations. Yet there are some positive incentives that could be introduced to help companies make responsible decisions and to get positive publicity for doing ‘the right thing’. For example, could emissionsintensive trade-exposed companies be awarded a Government or United Nations sponsored ERTEC (Environmentally Responsible Trade Exposed Company) tick? Even if granted concessions, coal-fired power stations and other emissions-intensive operations are unlikely to be operational a few decades from today. Even so, their owners will understandably fight hard to retain profits for as long as possible. Those backing renewable energy counter, pushing hard for mandatory targets to enable earlier, larger profits for themselves. Looking back from 2100, all these claims will be seen for their exaggerated nature.
Introduction
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Many scientists have focused far ahead and are scared by what they have seen. It is, however, not their role to implement solutions that encompass environmental, social and economic benefits. It is the legislators who face the challenge of balancing short-term fears and frequent elections with long-term goals and exciting opportunities. All too often the general public’s short-term fears, fuelled by those with vested interests in the status quo, necessitate the acceptance of slow progress. To those who wish to move forward at a faster rate, the legislators say that such gradual change is preferable to the only practicable alternative: no change at all. Maybe it is possible for a government to have the courage to build a long-term vision of how a carbon-constrained economy will emerge. This could reframe the whole discussion over the transition to a lower carbon economy away from increased costs and job losses to one of green-collar job creation, economic development and more sustainable communities. By building up a profile of what technologies will come to maturity at what stage over the next twenty to thirty years, it would be possible to target these technologies—and indeed specific global companies—and build a strategy for attracting them to Australia. If this vision were built up effectively, it could provide a foundation for the country’s prosperity for decades. It might also be hailed as a worldleading strategy on how to build an economy of the future. However, we have seen that the relatively simple task of pricing the externality of emissions has proved extremely problematic. Can we really hope that the broader approach to climate change, focusing on opportunity rather than fear, will be adopted by the global community? Despite being a relatively new concept, many groups throughout the world have recognised that alterations made inevitable by change are now creating opportunities to achieve multiple benefits. It is only by taking a wider view that the best solution may be allowed to emerge. Allowing the solution to emerge is an important emphasis. A ‘silver bullet’ solution to the problem may appear in many forms, but is always nothing but a mirage. Carbon capture and storage is heralded as the complete answer by many (particularly those with investments in coal). Wind power is touted as the solution by turbine manufacturers. Some have even espoused that the growing
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of genetically modified carbon-munching trees is the only alteration required to beat climate change. The total world system, combining global climate and human behaviour, is far more complex than allowed for by such approaches. A simple linear solution, one that encompasses only one dimension, will not provide the complete answer to environmental issues, let alone concurrently address social improvements. In addition, the complexity involved means that it is impossible to design an optimum solution at any one point in time. We must therefore be prepared to observe and act on feedback and adopt an iterative approach to improving the world. This will frustrate those with a clear vision of what the world should or must look like, will be highly disconcerting to traditional leaders who have achieved their successes via ‘set and forget’ strategies, and may prove problematic for politicians with election promises to uphold. So how do we approach this multi-faceted problem that requires the behavioural change of over six billion people? How do we approach climate change so that we secure opportunities to correct social defects as well as environmental ones? The fact that the problem of mankind’s contribution to climate change is even more complex, more global and more demanding of widespread change than any problem faced to date, is a wonderful chance to fundamentally alter the way in which we, individually, locally, nationally and globally, respond. It is not about assembling highly skilled task forces to ‘knock over’ the issue. Rather, it is about putting in place mechanisms that enable communities at all levels to deliver their own local benefits and systems. The bravest leaders will be those who inspire and enable change that allows millions of local heroes, all delivering a small part of the ever-evolving and improving response. Simple changes in philosophy can produce multiple benefits. Utility infrastructure, for example, has traditionally been developed using economics as a guide. Pure economics dictates that it would be inefficient to have two power-distribution wires or water-distribution pipes running in the same street, and thus natural monopolies have emerged. However, greater system-wide benefits could be achieved if communities were encouraged to establish local energy and water hubs distributing through their own networks. Stormwater capture
Introduction
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and distribution as proposed in Adelaide, Australia, or distributed power generation as implemented in Woking, England, present examples of new, simple, local projects with multiple benefits. Each of these will threaten entrenched interests and are disruptive business models, so will meet with resistance. But each also presents an opportunity for improved community and environmental outcomes. I believe that through the adoption of the broad approach advocated above, fears associated with climate change will be abated and many opportunities will be realised. In initiating this project, I wanted to assemble a collection of stories that sparked new ideas and discussion across a wide section of the community. Additionally I felt the need to create a general feeling of opportunity rather than the pervasive doom that appears to grow with each new scientific report. I was concerned that, without such optimism, ‘climate fatigue’ would be inevitable. It is important to recognise that every generation perceives itself as facing the world’s greatest challenge. In the past, those discovering continents, meeting new tribes, fighting wars or changing social mores have all believed that they have, in some way, saved mankind. Many in the climate debate would have us believe that never before have we faced such a crisis and that, further, they alone have the means to save us. There can be no doubt that climate change presents the world and its communities with many challenges, yet the apocalyptic future described by some inspires nothing but defeatism. This is no Armageddon between emissions-emitters and greenies! Neither is this a situation that can be adequately responded to by one line of attack alone. Communities around the world must be encouraged to develop an approach that allows for a new way forward, individually and as one. Recognising the enormity and complexity of the changes required, this book sets forth a wide variety of wonderful and extremely important ideas and concepts, yet does not seek to specify any one ‘solution’. By necessity, the response will be ever-emerging and evolving. It is hoped, however, that this book inspires thought about climate change and proves to be a step in the iterative process towards building a world where people can live sustainably. My own thinking on the climate-change problem, on how we may best approach it and what opportunities it creates for the
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communities, businesses, investors, nations and the entire world, has been aided by two analogies. The analogy between climate change and the debate over cigarettes is being written about more frequently. I first encountered it in a column by Phillip Adams in the Weekend Australian. It gained much coverage in the fascinating and ground-breaking legal action being pursued by residents of the Alaskan town Kivalina, who have accused many emissions-intensive companies of conspiring to hide the truth behind the climate changes destroying their town. The legal team leading this case happens to be the one that successfully pursued certain cigarette companies over their alleged conspiracy to conceal the harmful effects of smoking. The comparison between climate-change effects and diseases caused by cigarette smoking has been used by some to create powerful pictures of the ‘evils’ that may be engendered by big business. I, however, find it more useful to adopt the comparison when considering how scientific knowledge of the health impacts of smoking has been used to facilitate behavioural change. Tackling the problem of cigarette smoking required a range of inputs to achieve any level of success. A price signal was introduced, through increased taxes on cigarettes, together with comprehensive and targeted education campaigns. The positive outcomes achievable, such as living a longer and more enjoyable life, were stressed in addition to the negative consequences of inaction. Yet new approaches were required and more recently there have been regulations imposing bans on smoking in many places, further reinforcing the messages delivered earlier. While the warnings against smoking were put in purely personal terms, communities too have benefited from a healthier population and reduced litter. Transitioning to a low-carbon economy is a far larger and more complex issue, but the multi-strand approach to the problems associated with cigarette smoking provides some clues as to the thinking required. Another analogy that I find helpful is that of viewing the global community as the mind of the Earth. Much physical harm has been caused by its disturbed mental state and it is now necessary for the global community to undertake some self-reflection, explore its motivators and understand its true ‘wants and needs’. Only then can it leave the past behind and move forward to a sustainable future. The
Introduction
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human mind is a complex beast that rarely reacts in a linear fashion, and the comparison may provide a powerful means of approaching the behavioural changes and altered mindsets needed to tackle the problem of climate change. Indeed it does seem that the communities of the world must understand why they have behaved as they have done and must then envision what they want as a future. They must accept past mistakes as part of the journey, grieve for any losses, and provide themselves and others with the positive encouragement needed to create a different world. This book aims to enhance the process of encouraging communities to take bold steps and seize the opportunities that are emerging. To be self-indulgent for a moment, I should like to add that this project forms part of my own personal journey. With a family background combining business entrepreneurship and social activism, and having been described by a university tutor as ‘a charming underachiever’, I have had a life to date of limited risk-taking and safe achievement. However, I have always been an optimist, albeit not always one who has demonstrated great courage. A number of factors combined in recent years encouraging me to push my boundaries a bit further and some of these factors are, I feel, relevant to the topic at hand. An understanding of the beauty of simple things and happiness derived from an appreciation of my beautiful wife and vibrant sons, contrasted with lessons learnt from experiencing negative role models in both my professional and personal lives, has allowed me to establish my own personal goals. The implementation of these has not always been easy, requiring more introspection than I am comfortable with. The development of these goals coincided with a reading of Tim Flannery’s The Weather Makers followed by Ron Penrick and Clint Wilder’s The Clean Tech Revolution. The world’s climate problem was obviously serious and opportunities were plentiful for those willing to move away from the past. My own vision of catastrophe came to me one evening when watching the documentary Shake Hands with the Devil by Canadian General Romeo Dallaire, the commander of the UN troops in Rwanda at the time of the 1994 genocide. I had recently finished a fiction book titled The First Century After Beatrice by Amin Maalouf that told the
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tale of riots and devastation in poorer countries following the discovery and widespread global use of an Egyptian bean that, when taken by a prospective mother, would ensure that her baby would be born a male. Both these sources showed that even if global devastation does not initially impact upon richer countries, genocide and mass population movements resulting from widespread, climate change–induced crop failures would ultimately affect everyone. The optimist in me dismissed this horror as an option that could not be permitted to happen. I strengthened my resolve to tell tales inspiring visions of the opportunities that are emerging and the positive differences that can be made by mobilising global behaviour change. The telling of such stories will need to be done by many. However, the insightful writing produced by the authors in this book is, I believe, an important contribution. The book is divided into six sections with a number of essays by different authors in each section. The order of the sections provides a widening circle of inclusion, but each focuses on the opportunities that exist for various groups. It starts with essays that set the scene: a look at the urgency of climate-change issues; a view of the courage and depth required to find the right solution; an overview of technological solutions and a discussion on how a positive vision may best be communicated. Section 2 explores opportunities for communities and looks at ways in which improvements may be made to their design and operation, enhancing the lives of their inhabitants. The book then proceeds by examining the opportunities that exist for businesses, investors, nations and for the world as a whole. This book is not intended to provide the reader with a complete solution to the problems created by climate change. I hope, however, that it poses some useful questions and initiates further discussion. Read it with an open mind and use it to develop your own view on the ways in which a better world may be built.
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Part 1 Setting the Scene
C
limate change is the problem of the twenty-first century. This book details the many opportunities that are emerging as we solve
this problem. The scale of the opportunity is, however, far greater than the scale of the problem—and the scale of the problem is huge. Writing in Time magazine in April 2008, Bryan Walsh discussed the ability of the United States to win wars or rise to challenges when it set its mind to the task at hand. However, he pointed out that the ‘war on carbon’ had the potential to be far harder than previous challenges: Forget precedents like the Manhattan Project, which developed the atom bomb, or the Apollo program that put men on the moon—single-focus programs both, however hard they were to pull off. Think instead of the overnight conversion of the World War II—era industrial sector into a vast machine capable of churning out 60 000 tanks and 300 000 planes, an effort that not only did not bankrupt the U.S. but instead made it rich and powerful beyond its imagining and—oh, yes—won the war in the process.1 Halting climate change will be far harder than even that. This section provides the context for the problem, the solutions and the opportunities. The science of climate change is complex and this book does not attempt to repeat detailed narratives on this aspect. The precise nature of the problem is often difficult to grasp in its entirety and is often oversimplified to make it tangible. Sea-ice areas, average temperature increases and Pacific island land loss are all
measures of the consequences. One commonly used and simple measure that describes where we might be on the scale of change is that of parts per million (ppm) of carbon dioxide—equivalent (CO2e) gases in the atmosphere. Science has general agreement on both the pre-industrial levels and current levels of CO2e. There is more conjecture over what might happen at various levels of further increases and hence what is a desirable target for the world. This section provides a case that the current targets present unacceptable levels of risk and that, like an errant schoolboy, we ‘must try harder’. To drive a solution however is not an easy task. First, and most important, it is essential to recalibrate our view of the world. With the massive changes that are required, the community in which we all live has the opportunity to create a different world that works better, creates more sustainable societies and more fulfilled residents. To do this we must challenge all the assumptions behind the way the industrial world has been constructed and envision the future we want. It is also essential to understand the range of technological solutions that can be applied to the problem. By combining this knowledge with an understanding of the targets we want and the world we want to build, work can commence in delivering solutions. The last part of the puzzle to enable opportunities to be seized is communication. It is only by effectively communicating all of the above that widespread support and achievement will be secured. To date this has maybe been the greatest weakness in the armoury of those wanting to facilitate change. By gaining a feeling of these four aspects: targets, visions, technologies and communications, the reader can then frame the specific opportunities identified throughout this book.
Notes 1
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Bryan Walsh, ‘Why Green is the New Red, White and Blue’, Time, 28 April 2008, pp. 33–44.
John O’Brien
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When Words Fail Climate Change Activists Have Chosen a Magic Number Bill McKibben
I almost never write about writing—in my aesthetic the writing should disappear, the thought linger. But the longer I’ve spent working on global warming—the greatest challenge humans have ever faced—the more I’ve come to see it as essentially a literary problem. A technological and scientific challenge, yes; an economic quandary, yes; a political dilemma, surely. But centrally? A crisis in metaphor, in analogy, in understanding. We haven’t come up with words big enough to communicate the magnitude of what we’re doing. How do you say: the world you know today, the world you were born into, the world that has remained essentially the same for all of human civilisation, that has birthed every play and poem and novel and essay, every painting and photograph, every invention and economy, every spiritual system (and every turn of phrase) is about to be something so different? Somehow ‘global warming’ barely hints at it. The same goes for any of the other locutions. And if we do come up with adequate words in one culture, they won’t necessarily translate into all the other languages whose speakers must collaborate to somehow solve this problem. I’ve done my best, and probably better than some. My first book, The End of Nature, has been published in twenty-four languages, and
the essential idea embodied in the title probably comes through in most of them. It wasn’t enough, though, nor were any of the other such phrases (like ‘boiling point’ or ‘climate chaos’) that more skilful authors have used since. So in recent years I’ve found myself grasping, trying to strip the language down further, make it communicate more. This year I find myself playing with numbers. When the Northwest Passage opened amid the great Arctic melt in the northern summer of 2007, many scientists were stunned. James Hansen, our greatest climatologist, was already at work on a paper that would try, for the first time, to assign a real number to global warming, a target that the world could aim at. No more vague plans to reduce carbon dioxide in the atmosphere, or keep it from doubling, or slow the rate of growth—he understood that there was already enough evidence from the planet’s feedback systems, and from the quickly accumulating data about the paleoclimate, to draw a bright line. In a PowerPoint presentation he gave at the American Geophysical Union meeting in San Francisco in December 2007, he named a number: 350 parts per million carbon dioxide. That, he said, was the absolute upper bound of anything like safety—above it and the planet would be unravelling. It is unravelling, because we’re already at 385 parts per million. And so it’s a daring number, a politically unwelcome one. It means, in shorthand, that this generation of people—politicians especially—can’t pass the problem down to their successors. We’re like patients who’ve been to the doctor and found out that our cholesterol is too high. We’re in the danger zone. Time to cut back now, and hope that we do it fast enough so we don’t have a stroke in the meantime. So that Greenland doesn’t melt in the meantime and raise the ocean by seven metres. For me, the number was a revelation. With a few friends I’d been trying to figure out how to launch a global grassroots climate campaign—a follow-up to the successful Step It Up effort that organised 1400 demonstrations across the United States one day and put the demand for an eighty per cent cut in America’s carbon emissions at the centre of the political debate. We need to apply even more pressure, and to do it on a global scale—it is, after all, global warming. But my friends and I were having a terrible time seeing how to frame this next effort. For one thing, the 180 or so countries that will negotiate a
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new international treaty during 2009 are pretty much beyond the reach of effective lobbying—we did maybe influence the American election, but the one in Kenya? In Guatemala? In China? And for another, everyone insists on speaking those different languages. A Babel, this world. But a number works. And this is a good one. Arcane, yes—parts per million CO2 in the atmosphere. But at least it means the same thing in every tongue, and it even bridges the gap between English and metric. And so we secured the all-important URL: http://350.org. (Easier said than done.) And we settled on our mission: To tattoo that number into every human brain. To make every person on Planet Earth aware of it, in the same way that most of them know the length of a soccer field (even though they call it a football pitch or a voetbal gebied). If we are able to make that happen, then the negotiations now under way, and due to conclude in Copenhagen in December of 2009, will be pulled as if by a kind of rough and opaque magic towards that goal. It will become the definition of success or of failure. It will set the climate for talking about climate. So the literary challenge—and the challenge for artists and musicians and everyone else—is how to take a mere number and invest it with meaning. How to make people understand that it means some kind of stability. Not immunity—we’re well past that juncture, and even Hansen says the number is at best the upper bound of safety, but still. Some kind of future. Some kind of hope. That it means kids able to eat enough food, that it means snow caps on mountains, that it means coral reefs, that it means, you know, penguins. For now 350 is absolutely inert. It means nothing, comes with no associations. But our goal is to fill it up with overtones and shades and flavours. The weekend before we officially launched the campaign, for instance, 350 people on bicycles rode around the centre of Salt Lake City. That earned a story in the paper and educated some people about carbon dioxide—but it also started to tint 350 with images of bicycles and the outdoors and good health and pleasure. We need 350 churches ringing their bells 350 times; we need 350 spray-painted across the face of shrinking glaciers (in organic paint!); we need a stack of 350 watermelons on opening day at your farmers’ market; we need songs and videos; we need temporary tattoos for foreheads. We may need 350 people lining up to get arrested in front of a coal train.
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It makes sense that we need a number, not a word. All our words come from the old world. They descend from the time before. Their associations have congealed. But the need to communicate has never been greater. We need to draw a line in the sand. Say it out loud: 350. Do everything you can. Originally published in the July/August 2008 issue of Orion magazine.
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2
What Holds Us Back from the Big Shift? Time to Stop the Hand-Wringing and Start Envisioning What We Really Want Dr Sam Wells
I would give all the wealth of the world, and all the deeds of all the heroes, for one true vision. Henry David Thoreau
Wherever we look today we are confronted by challenges to global sustainability, and they seem almost overwhelming. Climate change; poverty; community fragmentation; water scarcity; deforestation; desertification; threats to food quality and distribution; urban pollution; soil depletion; decreasing biodiversity; accelerating species extinction … the list goes on and on. To make matters worse, while there is a great deal of discussion about potential harm and a growing sense of urgency to do something, it’s difficult to cite instances where our response as a community, as a species, has been equal to the challenge. We are, in fact, doing lots of things, but all our doing does not yet seem to be making the necessary impact, or seem likely to do so. Management of water and South Australia’s Murray-Darling river system is a good example. We know that, over and above any use we choose to make of the river water, the ecological health of that entire
river system requires 1500 to 2000 gigalitres per year, the so-called ‘environmental flows’. We’re working hard as a community to preserve this magnificent and precious waterway, and yet, at the time of writing, the environmental flow is effectively zero litres, and the Coorong continues to die. The Murray is still a beautiful, inspiring body of water, but we seem as far away as ever from being able to secure its long-term health. And so it is, also, with climate change. There is no shortage of discussion, no shortage of debate, and a good deal of alarm—there is even a growing consensus on the need for urgent and far-reaching action. There is a flurry of activity—in the media, in government—a great deal of busy-ness at the margins of change. But we seem to be always at least one order of magnitude off the pace, and the absence of change, or even proposed change, on the scale and within the time frame required by the crisis, drives us to wonder in our bleaker moments whether we collectively have what it takes to meet the challenge. Why is it, then, that in relation to water management, land use, climate change and a whole range of threats to global sustainability we see evidence of small changes at the margins of the established approach, but very little evidence of the fundamental shift in thinking and action—the transformational change—that is demanded by the crisis confronting us? Why is it that we seem almost paralysed by the threats to our present and future wellbeing? We do make peripheral changes, but in ways that we know are inadequate, and they just seem to render our failures less excusable and more difficult to comprehend. It is clear that we do not lack the means to address the challenges we face—numerous papers from the cleantech industry presented at the Beyond Carbon 2008 conference in Adelaide confirmed the confidence in our technological capacity. So it is the will to act that is missing. How do we explain—and make good—the lack of will? In attempting to answer that question, I want to consider an historical coincidence, reflected in the publication of two books … although one cannot help wondering, as the Historian is so often left to wonder, if the forces giving rise to one occurrence may have given rise, in subtle and unfathomable ways, to the ‘coincident’ occurrence.
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The year 1962 saw the publication of Rachel Carson’s Silent Spring,1 a book that many mark as the starting point of the modern environmental movement. Carson lifted the lid on the devastating impact of artificial pesticides, like DDT, on the natural world. The trail of damage and death that she traced into the ecosystem ended not only with the silenced birds, but also with gravely afflicted humans. Carson was vilified by various contemporary scientists, some of them representing the pesticide manufacturers, but some of them, too, working for the national administration. In the face of failing health and these attacks on her credibility, Carson persevered, and by the time of her death in 1967 her work had prompted a public policy turnaround, and the start of restrictions on the use of DDT.2 And yet, despite her personal greatness and her undeniable achievements, for forty years we have continued to fight her fight, over and over again. The fight is fought on different fronts, in different contexts, but essentially it is the same fight, combating the insidious damage to complex natural systems caused by unrepentant selfinterest or, even worse, well-meaning but short-sighted attempts to improve mankind’s control of nature … the road to hell, paved with good intentions. These battles are often won, but victory in the war— a fundamental shift in the way we see the world, which makes it unnecessary to fight more battles—remains elusive. Is there something about the ground we have chosen to defend that keeps us from the triumph of balance, harmony, goodness, abundance, nourishment and loving interdependence that we seek? Donella Meadows, one of the giants of the contemporary sustainability movement who, like Carson, died tragically young, felt that environmentalists themselves have contributed to this inability to slough off the old skin: Environmentalists have failed perhaps more than any other set of advocates to project vision. Most people associate environmentalism with restriction, prohibition, regulation, and sacrifice … The best goal most of us who work toward sustainability offer is the avoidance of catastrophe. We promise survival and not much more. That is a failure of vision.3
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Meadows argues that we are so caught up with combating and protecting, so caught up with what is wrong with our world, that we give no time to articulating and sharing a vision of what we really want— not what we will ‘settle for’, but what we really want—‘It is pitifully inadequate to describe the exciting possibilities of sustainability in terms of mere survival.’ The distinction that Meadows makes between survival and vision, scarcity and abundance, links this discussion to another book born into the scientific community in 1962. It did not sit in the bestseller lists like Silent Spring did, but in its own way it has had a comparable impact. It was not written by a scientific activist, but by an historian of science, Thomas Kuhn.4 The Structure of Scientific Revolutions introduced us to the notion of the scientific ‘paradigm’, that theoretical framework or way of seeing things, that becomes so entrenched in a given period that even evidence from nature seeming to contradict it is somehow accommodated within it. Various facets of Kuhn’s thinking have been the subject of ongoing academic debate but, despite that, his insights into paradigms and paradigm shifts have thrown light on the way entrenched mental models shape our individual and collective thinking, well beyond the sphere of formal scientific research that he was seeking to elucidate. One of his most piercing insights concerned the motivation for a shift in paradigm. Kuhn observed that when evidence emerged that caused uneasiness about the validity of the established paradigm, the first response of the defenders of orthodoxy was, in fact, to change … but only at the margins. The changes were to refine or ‘complete’ in some way this or that facet of the current paradigm, or to elaborate on the underlying principle—in other words, the changes had the practical effect of actually reinforcing the established model.5 Even when the evidence of flaws started to become overwhelming, there was still a reluctance to make a fundamental shift in thinking— changes were only just sufficient to stave off the full implications of the evidence. Now here is Kuhn’s critical insight. No matter how uncomfortable things became in relation to the ability of the current paradigm to make sense of the evidence, the discomfort did not cause a change
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in paradigm. When the shift finally came, it was not away from a failed paradigm, but towards a new paradigm—a new, fundamentally different, and better theoretical framework for making sense of all the evidence. This, then, may be one part of the secret of our strange paralysis, of our inability to initiate and embrace the changes demanded by our times. We have been so preoccupied with the threats to our present and future wellbeing, so intent on depicting what will happen if we do not act, that we have given ourselves few reasons to act boldly or to make the shift required. We have busied ourselves at the edges of the current paradigm, the current way of thinking, trying desperately to bend and shape it so that it can respond to each symptom of crisis and save us from harm. Like fearful creatures caught in the headlights of oncoming disaster, we have allowed our vision of the future to be shaped by the future we fear. But Kuhn has more to say about the implications of a shift in paradigm and, therefore, more light to throw on the nature of our paralysis. He points out that, by definition, the new paradigm cannot simply be an elaboration of the old. There is no place for a sense of comfortable evolution in thinking. Any such thinking would reinforce and belong to the old paradigm. The new paradigm not only represents a clean break from the old. In making that break, it also marks the old paradigm as flawed—not incomplete, but incompatible.6 So, Kuhn’s argument suggests, the paradigm shift—the ‘revolution’—comes when we can embrace a new way of seeing things and, in doing that, can acknowledge the fundamental shortcomings in the old way, even if it appears to have served us well. How does this help us to understand our current inaction in the face of such compelling global reasons to act? To answer that, we must again connect Kuhn’s thinking with Meadows’ discussion of envisioning sustainability. When Meadows describes the apparently simple dichotomy between what we truly want and what we ‘settle for’, she captures the essence of the paradigm shift required of us if we are to meet the challenges of global sustainability. ‘What we’ve settled for’ represents the old paradigm. It reflects all the compromises, all the accommodations that we have made in shaping a world based on dis-integrated knowledge—based on our infatuation with the parts, not the whole; with symptoms, not causes; with management, not healing; with
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either/or, not both/and; with trade-offs, not synergies; with scarcity, not abundance. In Meadows’ narrative, this old paradigm reflects the loss of the child’s capacity to see to the very heart of things and to articulate a vision of all that is most precious in our world, and our growing discomfort with such a ‘childish’ vision as we grow up, become more ‘realistic’, more ‘pragmatic’. In other words, when it comes to questions of global sustainability, the vision of what we really want is a vision of wholeness and healing.7 But in order to embrace that vision and move forward, we are being asked to surrender what we have settled for—all the fragmented thinking and all the convenient compromises and comfortable rationalisations that sustained the unsustainable. It is not easy. Fifty years ago, Leon Festinger described our reflex response to the discomfort of ‘cognitive dissonance’8—the simultaneous engagement with two incompatible ‘knowledges’—and our talent for misleading the intellect, or rationalising, so that we can reduce the experience of conflict and live with the contradiction. When it comes to making sense of the established paradigm, we appear to have an unlimited capacity to suspend disbelief. The old way is comfortable—intellectually comfortable, because of our ability to rationalise; emotionally comfortable, because we do not have to confront those powerful feelings and values that underpin a vision of what we really want—‘Call it heart, call it soul, whatever is the source of vision, it is not rational mind.’9 It may be, then, that our paralysis has two dimensions. The ‘headlights’ in which we are trapped, seemingly powerless to move, may be our sense of oncoming disaster; but they may also be the uncomfortable brightness of our unspoken vision. We are preoccupied with the catastrophic consequences of inaction, but seduced by the sense that action comes most readily, most comfortably, from within the old paradigm. On both counts, the new paradigm of wholeness cannot gain sufficient ‘traction’ to set on track the process of a paradigm shift. So, how to move forward? In particular, how do we trigger that transformation—or, as Kuhn would have termed it, that ‘revolution’— of thinking and action required by our times? The answer surely lies in vision, in a vision of newness so nourishing and compelling that it
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frees us from the comforts of the old thinking and the constraints of mere survival. And not just an abstract vision, but one that gives concrete expression to the future possibilities, a vision that we can hear and touch and see and taste and smell. Vision is inextricably bound up with leadership, and leadership at all levels in our community carries a responsibility for helping to shape, articulate and demonstrate the vision of possibilities. At the heart of that vision lies a celebration of opportunity, rather than a wallowing in fear. The way forward—the way of wholeness—abounds in opportunities for living better, fuller, happier, richer lives. At one end of the spectrum, the challenge of climate change is sometimes called a ‘spiritual opportunity’ for humankind. But anyone who attended the Beyond Carbon 2008 conference in Adelaide would also have been struck by the more mundane sense of abundant commercial opportunity communicated by the cleantech industry. This reflects the global upsurge of investment in the technologies and products and services of wholeness, and the prospect of many billions of dollars still to be profitably invested. Wherever the depths of the catastrophe awaiting us are plumbed, it is incumbent on thought leaders of all sorts in all circumstances to match that source of hand-wringing paralysis with a liberating, inspiring, accessible vision of possibilities. One of Australia’s sustainability giants, Dexter Dunphy, shows us exactly how it is done—how it must be done if we are to step out of the headlights and into a sustainable and sustaining future: We must move to a carbon-free, low-consumption economy and do it fast. We know this. But we go on opening new coal mines, new coal-fired power plants, new factories pouring out more STUFF … There is an alternative. We are free to choose to create the carbon-free economy, to limit human population and to reduce material consumption. We could live a richer and more satisfying life by making this choice. Australia has most to lose by runaway climate change but also great advantages in leading in limiting global warming. Alternative energy technologies could readily produce all
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the energy we need without recourse to coal or nuclear fuels. The technology is available now or needs minimal development. We could: • produce most food locally and eat organic, fresh, wholesome food; • renew local communities, walk, ride bicycles and develop effective public transport systems and car sharing; • limit travel out of the local area to workplaces by making greater use of modern communication technologies; • live more simply and, if we wish, elegantly, by limiting our possessions to things we actually use, and sharing or hiring things we use only intermittently; • create a satisfying life-sustaining rather than lifethreatening lifestyle; • support workplaces with meaningful work that contributes to our wellbeing; • live in harmony with other species on this planet; and • prefer services to things and cultivate a rich and varied cultural life. We need to learn again the lesson of the great Zen masters that ‘less can be more’. Alternatively, we can choose to continue to consume—survival is not compulsory.10 Donella Meadows tells us that the art of envisioning lies in recapturing the child’s capacity to articulate what we really want, without submitting to our habit of second-guessing ourselves, seeing first all the reasons why not, and demanding a certain pathway to the goal.11 The way to our vision lies through complexities that will not admit any certainty, but if the vision is true, the path emerges. And we are freed to travel it—from the old paradigm to the new, from paralysis to action, from fragmentation to wholeness, from fear to opportunity.
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Notes Parts of this piece appeared under the author’s name in the Adelaide Advertiser newspaper, 11 April 2008, p.18, and in a presentation on 3 June 2008, for the Climate 2030 seminar series initiated by the University of Adelaide’s Research Institute for Climate Change and Sustainability. 1 2
Rachel Carson, Silent Spring, Hamish Hamilton, London, England, 1962. Linda Lear, Rachel Carson: Witness for Nature, Henry Holt & Co., New York, USA, 1997. 3 Donella Meadows, ‘Envisioning a Sustainable World’, paper presented at the Third Biennial Meeting of the International Society for Ecological Economics, San Jose, Costa Rica, 1994, p. 2. 4 Thomas Kuhn, The Structure of Scientific Revolutions, University of Chicago Press, Chicago, USA, 1970. 5 ibid, pp. 77–8. 6 ibid, p. 92ff. 7 These two words share a common root in Old German and Old English. 8 Leon Festinger, A Theory of Cognitive Dissonance, Row, Peterson & Company, Evanston, USA, 1957. 9 Meadows, p. 5. 10 WME Environmental Management News, http://Environmental ManagementNews.net.newsletter, Tuesday 7 October 2008. 11 Meadows, p. 5.
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Towards a Fossil Fuel–Free Future Professor Stephen Lincoln
Introduction As oil prices began to rise sharply from the beginning of 2008, food prices did likewise and it became apparent that major food shortages could afflict a substantial section of humanity unable to meet the increasing cost. The connection between these events is that agriculture and food production are energy intensive and sensitive to energy cost as a consequence. In fact, virtually every aspect of human activity is dependent on a readily available supply of moderately priced energy and it is self-evident that significant disruption of this supply will impact substantially on living standards and economies around the world. While the steady increases in oil prices arose to some extent from market speculation, they were underpinned by increasing demand until the financial collapse of late 2008. The subsequent fall in oil price will give some respite, but with economic recovery the pressure on price will resume as liquid crude-oil reserves deplete and this, in turn, is likely to lead to increases in the cost of natural gas and coal. At the current rate of extraction the proven oil reserves will be exhausted in 41.6 years (Figure 1). The corresponding figures for natural gas and coal are 60.3 and 133 years. The massive magnitude of
energy use is illustrated by the 491.5 exajoules of energy in all its forms used in 2006, enough to heat 180 tonnes of water from freezing to boiling for every person on Earth.1 As population and energy demand increases it is clear that humanity’s 80.9 per cent dependency on fossil fuels (Figure 2) cannot continue indefinitely and that the use of alternative energy sources and the efficiency of energy use must increase greatly to maintain the security of energy supply. Nevertheless, fossil fuels are still expected to represent about 80 per cent of energy consumption in 2030 according to the International Energy Agency (IEA).2
Figure 1: Proven liquid crude-oil reserves in billions of barrels by region at the end of 2007 and the time to depletion determined by the ratio of the size of the reserve to the rate of extraction. These reserves corresponded to 168 600 million tonnes of oil (7054 exajoules), the natural gases reserves were 177 360 billion cubic metres (6507 exajoules) and the coal reserves were 847 488 million tonnes (21 300 exajoules). Source: BP, BP Statistical Review of World Energy June 2008, BP plc, London, UK, www.bp.com/statisticalreview
Figure 2: Percentage of global primary energy by source in 2006. The total energy produced was 11 741 million tonnes of oil equivalent or 491.5 exajoules. Source: International Energy Agency, Key World Energy Statistics 2008, IEA, Paris, France, www.iea.org/textbase/nppd/free/2008/key_stats_2008.pdf
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The issue of the security of energy supply superimposes on the increasing realisation that the Earth has warmed by an average of 0.8°C since the beginning of the Industrial Revolution largely because of increased atmospheric levels of carbon dioxide arising from fossilfuel usage.3 This overall upward trend in temperature shows short time periods over which temperature has stabilised or decreased such as that from 2000 to 2008.4 The warming has not been uniform and has been greatest in the Arctic region.5 The resulting climate change is notably evidenced by melting glaciers and decreasing Arctic sea ice. The combined effects of a rapidly growing population, climate change and rising energy costs pose a challenge to maintaining a secure energy supply and the wellbeing of humanity. An analysis of the way in which we came to this point in our history provides some guidance to achieving a more sustainable future.
The Advent of Fossil Fuels The Industrial Revolution, which was underway in the UK by the midnineteenth century, could not have occurred without the increasing availability of energy and the technology to use it productively. Coal rapidly became the dominant energy source and its use soon spread to Europe where wood had previously been the major fuel. Across the Atlantic the discovery of oil in commercial quantities in Pennsylvania in 1859 accelerated the use of oil as further discoveries in the US occurred, and increasing exploitation of Middle Eastern and other oil fields began. The fossil-fuel age had arrived. Industrialisation spread rapidly in the western world to produce a wide variety of goods for domestic use and export. Mechanisation of agriculture hugely increased the availability of food and released farm and kindred workers for employment in burgeoning new industries. Although often inequitably shared, wealth grew and living standards improved. This was dominantly possible due to the increasing availability of moderately priced energy from fossil fuels. During the twentieth century, world population grew from 1.6 to 6.1 billion, average world per capita income increased from US$900 to US$8000 coincident with global energy consumption rising from about 40 exajoules in 1900 to 430 exajoules in 2000.6 The magnitude of current energy consumption is illustrated by those of the twenty highest energy consuming countries in 2007 shown in Figure 3.
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Figure 3: Primary energy consumption by the twenty major consumer countries in petajoules in 2007. Source: BP, BP Statistical Review of World Energy June 2008, BP plc, London, UK, www.bp.com/statisticalreview
The demand for energy is projected to grow from 487 exajoules in 2005 to 733 exajoules in 2030.7 (Estimates of global energy use vary slightly between sources due to variations in accounting procedures.) This corresponds to a likely 19 per cent increase in demand for the Organization for Economic Cooperation and Development (OECD) countries while that for the non-OECD countries is likely to be 85 per cent. A coincident increase in global carbon-dioxide emissions from 28.1 billion tonnes in 2005 to 42.3 billion tonnes in 2030 is anticipated. It is apparent from this that fossil fuels will continue to provide a major proportion of world energy well into the twenty-first century.8 This will be particularly the case if the vast and largely unexploited heavy oil, oil sand, shale oil and methane-hydrate deposits, which are much greater than the original reserves of liquid crude oil and natural gas, come into play.9 Half of these resources are probably recoverable
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but not necessarily at a price competitive with alternative energy sources, and the problem of reducing carbon-dioxide emissions remains. In an attempt to reduce carbon-dioxide emissions from fossilfuel usage, proposals for carbon-dioxide capture and storage are attracting substantial attention.10 This technology is presently only readily applicable to large stationary sources of carbon dioxide such as fossil fuel–fired power plants where it may be captured from flue gases and either permanently stored as carbon dioxide or converted to carbonates in suitable geological formations. At present, only a few million tonnes are captured and stored annually and the application of this technology will have to be greatly increased if any significant impact is to be made on the 30 billion tonnes of carbon dioxide arising from fossil-fuel combustion in 2008 and increasing thereafter. This development could cost as much as US$50 per tonne of carbon dioxide and render alternative energy sources more cost competitive.
The Carbon-Dioxide Problem Carbon dioxide is a major component of the biological and geochemical carbon cycles that control all life on Earth. The most obvious part of these complex processes is photosynthesis. Sunlight powers the combination of carbon dioxide and water to produce carbohydrates, which lead to all of the other complex molecules that make up green plants while at the same time generating the oxygen we breathe. It is rather strange that instead of being viewed as one of the most important molecules sustaining our existence, carbon dioxide is sometimes viewed as just the opposite in climate-change discussions. The ability of the increasing but small percentage of carbon dioxide in the atmosphere to affect Earth’s climate is sometimes subject to disbelief. This is understandable to some extent as nitrogen and oxygen together make up 99 per cent of the atmosphere and it seems reasonable to think that they should play a dominant role. However, because of the quantum science governing the absorption of energy by molecules, nitrogen and oxygen cannot absorb infra-red radiation and therefore do not contribute to the warming of the atmosphere, or the greenhouse effect, as does carbon dioxide, which absorbs infrared radiation and is the second most important greenhouse gas.
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As the Industrial Revolution progressed, the small percentage of carbon dioxide in the atmosphere began to increase from about 0.027 per cent by volume to the 0.038 per cent which it is today. This arose dominantly from the burning of fossil fuels. In the late nineteenth century a few perceptive individuals, such as the great Swedish scientist Svante Arrhenius, realised that this would cause an increasing proportion of the infra-red radiation emanating from Earth’s surface to be retained in the atmosphere and that global warming would result.11 Today, extensive calculations of the effect of increasing atmospheric carbon-dioxide and other greenhouse-gas levels on future climate are the preoccupation of many who seek to predict how serious the resulting climate change might be. Such studies are the basis of the daunting climate projections made by the Intergovernmental Panel on Climate Change (IPCC) if we do not change our habits and restrict the carbon-dioxide atmospheric
Figure 4: The variation of atmospheric carbon-dioxide levels in parts per million by volume (ppm) at Moana Luo, Hawaii. The regular rise and fall of the carbon-dioxide level about a steadily rising mean value is a consequence of carbon dioxide being taken up in photosynthesis during spring and summer, and being released as deciduous plants lose their leaves which release carbon dioxide as they decay in autumn and winter. Source: National Oceanographic and Atmospheric Agency and P Pans, NOAA/ESRL, www.esrl.noaa.gov/gmd/ccgg/tends/
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content to a maximum of 0.045–0.055 per cent, or 450–550 parts per million, to limit global warming to 2–3°C to minimise climate change.12 Of the 30 billion tonnes of carbon dioxide released through fossil fuel use in 2008 about 10 billion tonnes were absorbed largely by increased plant growth and the oceans, which became more acidic as a consequence, while the remainder further increased the atmospheric carbon-dioxide level. Global carbon-dioxide emissions are accelerating, and the consequent growth in atmospheric carbondioxide levels is monitored globally.13 The longest such continuous monitoring has been conducted on the slopes of Moana Luo, Hawaii (Figure 4).14 The United States and China are together responsible for 40 per cent of global carbon-dioxide emissions from fossil-fuel burning (Figure 5). By commissioning a new gigawatt coal-fired power plant on an almost weekly basis, China is on the verge of becoming the largest carbon-dioxide emitter from fossil-fuel use.
Figure 5: The fifteen largest national carbon-dioxide emissions from fossilfuel burning in 2006. Source: International Energy Agency, Key World Energy Statistics 2008, IEA, Paris, France, www.iea.org/textbase/nppd/free/2008/key_stats_2008.pdf
Water vapour, with atmospheric levels that vary with season and geographic location, is the most important greenhouse gas and its levels will increase as global warming continues. The levels of the greenhouse gases methane and nitrous oxide are also increasing as a
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result of growing cattle production and nitrogen fertiliser use. Simultaneously with the rise in greenhouse-gas levels, the melting of ice sheets and glaciers which reflect sunlight back into space further compounds the problem. Thus, humanity finds itself at a perplexing crossroad. The greenhouse effect dominated by atmospheric carbon dioxide and water vapour has caused the Earth to enjoy an average global temperature of 15°C which has allowed us to live on every continent except Antarctica for much of the Holocene epoch.15 In the absence of the greenhouse effect, Earth would experience the –18°C of the airless moon and be an icy planet on which life as we know it could not exist. By increasing the greenhouse-gas levels in the atmosphere we may cause climate changes that will seriously compromise our future at the very time when population is increasing by about eighty million a year and placing further demands on resources of all kinds.16 It is anticipated that world population will reach nine billion by 2050 and that energy demand will probably double. As a consequence carbon trading and capping schemes to control and reduce carbon-dioxide emissions are either in place or under consideration in many countries as the international community contemplates the form of a new treaty to control greenhouse-gas emissions when the Kyoto Protocol expires in 2012.17 This has increased the urgency to rapidly develop alternative energy sources with a large renewable component and minimal carbon-dioxide emissions.
The Traditional Renewable Energy Resources Combustible renewables and waste which contributed 10.1 per cent of the world’s energy in 2006 (Figure 2) largely consisted of charcoal, wood, grass, harvest waste and dried dung used by more than two billion people as their main cooking fuel in the poorer developing nations. Some of the fuel wood was from managed wood lots and some of the remaining plant-based fuel was used on an unplanned renewable basis. However, unconstrained fuel-wood collection has denuded parts of Africa in particular and is unsustainable. Hydroelectricity from large dams contributed 16 per cent, or 3029 terawatt hours, of the world’s electricity in 2005 which compares with 1284 terawatt hours, in 1973.18 This was a decrease from 21 per cent in 1973 and reflected the increase in electricity production over
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the same period from 6116 to 18 235 terawatt hours with the growth coming mainly from fossil fuel–fired power plants. Most hydroelectricity is generated in regions were river-flow is assured and constitutes a secure renewable energy supply. It is estimated that there is sufficient river capacity to increase hydroelectricity to 40 000 terawatt hours annually, but given the economic, environmental, technological and societal considerations that surround the building of large dams19, it is probable that an increase to about 8000 terawatt hours annually is more realistic.20 Small dams that presently generate about 60 gigawatt hours annually have the potential for wider deployment and are usually considered to be a component of the ‘modern’ renewable energy resource ensemble that made up a mere 0.6 per cent of the global energy mix in 2006 (Figure 2). Clearly the contribution from renewable energy must greatly increase if the global dependence on fossil fuels is to be significantly decreased.
The Biofuel Option At first glance biofuels are attractive alternatives to fossil fuels, particularly for transport.21 Photosynthesis combines carbon dioxide and water to produce green plants from which bioethanol and biodiesel are produced, which, on combustion, produce carbon dioxide and water to start the cycle over again—ideally without altering atmospheric carbon-dioxide levels. However, the situation is more complex than this.22 At present the major sources of biofuels are maize, wheat, sugar cane, sugar beet and a range of vegetable oils. This precipitates a competition between energy and food in agricultural production and for arable land and is responsible for increasing food prices to some extent. (It is salutary to reflect that 240 kilograms of maize which could feed a person for a year, yields about 100 litres of bioethanol; enough to fill the tank of a large automobile.23) Already, this is encouraging further clearing of forests in parts of Asia to grow biofuel crops. Quite apart from the threat that this poses to increasingly endangered wildlife, the clearing of forests releases large amounts of carbon dioxide through burning and subsequent decay of plant debris, which take many years of biofuel production to offset. Nevertheless, 40 and 6.5 billion litres of bioethanol and biodiesel, respectively, were produced in 2006 (Figure 6) and grew from virtually no production in 1975 and 1990.24
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Figure 6: Bioethanol and biodiesel production in millions of litres in 2006. Source: World Bank, World Development Report 2008: Agriculture for Development, Washington, DC, USA, pp. 70–1, http://econ.worldbank.org/WBSITE/EXTERNAL/ EXTDEC/EXTRESEARCH/EXTWDRS/EXTWDR2008/0,contentMDK:21410054~menu PK:3149676~pagePK:64167689~piPK:64167673~theSitePK:2795143,00.html
Estimates of the energy balance for bioethanol production from wheat and maize starch vary substantially when the full energy costs of fertiliser and pesticide use are added to those of cultivation, harvesting, transportation and bioethanol production.25 For wheat and maize, estimates of the energy contained in the bioethanol and byproducts appear to be settling at about 25 per cent greater than the energy input, with a corresponding 25 per cent reduction in greenhouse-gas emissions over gasoline.26 This situation could be improved if instead of using only the grain for bioethanol production, some of the harvest residue that takes up a substantial proportion of the energy used in producing the grain crop could also be utilised in bioethanol production with the remainder being used for soil regeneration for the next crop. Brazilian sugar cane shows a substantially greater profit in the energy content of the bioethanol of 1921 megajoules per tonne and the surplus energy generated from the bagasse (169 megajoules per tonne ) by comparison with the energy used in its production (251 megajoules per tonne ).27 This represents an impressive 830 per cent gain in the total energy produced over that used in production. A major reason for this is that much of the energy used in producing bioethanol from the sucrose comes from burning the crushed sugar cane, or bagasse. Bioethanol produced in this way shows a 90 per cent reduction in greenhouse-gas emissions over
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gasoline. Biodiesel is produced from the triglycerides present in vegetable oils and the estimates of the energy contained in the biodiesel and by-products cluster at about 80 per cent greater than the energy input, and at a 50 per cent greenhouse-gas emissions reduction over diesel fuel.28 Much of a green plant consists of cellulose and lignin which cannot be fermented along with the carbohydrates by the methods used in most current bioethanol production. Processes in which cellulose may be economically broken down to carbohydrates for fermentation to produce ethanol, usually called cellulosic ethanol, are subject to much study and could be used to produce ethanol from harvest residues, forest and wood waste, and waste paper.29 Switchgrass, which grows on agriculturally marginal land, offers the opportunity to increase the supply of cellulose for ethanol production. A recent farm-scale study has shown a 540 per cent greater ethanol energy content than the energy input in its production, and a 94 per cent reduction in greenhouse-gas emissions over gasoline.30 While there is a preoccupation with bioethanol and biodiesel production as they are transportation fuels, the use of biomass to provide other fuels for stationary energy-generating facilities is also under active study.
The Nuclear Option Currently, nuclear power supplies 6 per cent of total world energy and 15 per cent of electricity from 439 nuclear reactors in 30 countries.31 Of these, France generates the greatest proportion of its electricity from nuclear power at 78 per cent while China generates the least at 2 per cent. As fossil-fuel costs increase so nuclear power becomes more cost competitive. This, combined with its much lower ‘whole of life’ carbon-dioxide emissions, has caused several countries to plan expansion of their nuclear-power programs. In 2008, thirty-five new nuclear reactors were being built and others were planned. Nuclear power generated 370 gigawatts of the world’s electricity in 2008, and according to the International Atomic Energy Agency (IAEA) this could rise to 447 gigawatts and 691 gigawatts at the low and high end of estimates, respectively, by 2030. Currently, the nuclear-fission reactors producing electricity commercially are uranium-235 fuelled
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and at the present rate of usage, proven uranium reserves could supply uranium-235 for about 150 years. The storage of high-level nuclear waste imposes a small but long-term cost on nuclear power.32 Technological problems and cost have so far prevented significant commercial generation of electricity using fast breeder reactors, which produce plutonium-239 nuclear fuel from uranium-238 which constitutes 99.3 per cent of naturally occurring uranium and is itself not a nuclear fuel. This option could greatly increase the amount of electricity generated from uranium reserves. Another type of breeder reactor that produces the nuclear fuel uranium-233 from thorium-232 appears to be likely to begin commercial operation in a decade or so.33 As thorium-232 reserves are much greater than those of uranium-235 and -238 this could extend the timeline for nuclearfission power usage substantially. The alternative source of nuclear power, nuclear fusion of deuterium and tritium to produce helium, has yet to prove its viability. Nevertheless, the massive International Thermonuclear Experimental Reactor (ITER) is under construction at Cadarache in France.34 The participants in the project are the European Union, Japan, China, India, South Korea, the Russian Federation and the United States. The proposal is essentially to use the same nuclear-fusion process that powers the sun. This requires heating deuterium and tritium to more than 100 000 000°C to fuse them into helium and release neutrons. No material can withstand such high temperatures and so the fusion plasma will be contained by a powerful magnetic field produced by superconducting magnets. Most of the vast amounts of energy generated will be carried by the neutrons and released as heat as they are slowed by the surrounding structure including a lithium blanket in which lithium-6 absorbs a slow neutron to give tritium and helium and lithium-7, which breaks down when impacted by a fast neutron, to produce more tritium for the fusion reaction along with helium. The heat is carried away by cooling fluids and could generate superheated steam to drive turbines in a future electricity-generating facility. However, it is anticipated that the ITER is unlikely to be running until 2016, and a demonstration nuclear-fusion power plant is at least thirty years away.
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The Solar Option The sunlight falling on Earth in a year contains about 8000 times the total amount of energy used annually. Capturing a small fraction of this energy could supply all of humanity’s energy requirements.35 Assuming a 10 per cent efficiency in solar energy capture over a collector area of 780 kilometres by 780 kilometres experiencing sunlight at an annual average of 5 kilowatt hours per square metre per day could supply 110 million gigawatt hours of electricity equivalent to the output of 12 700 1-gigawatt power stations operating continuously at maximum capacity. This is equal to the 400 exajoules of energy gained from all fossil fuels likely to be used globally in 2009. The collector area would include small roof-mounted panels and range up to very large solar collection arrays. While this is easy to say, the technological and infrastructure innovations required to greatly increase the use of solar energy to the point where it replaces a major portion of the energy from fossil fuels should not be underestimated. However, sunlight is only available during the day and its intensity is highest between 30°N and 30°S. These factors will substantially influence the type and geographical location of deployment of major solar-energy facilities. There are two main methods for solar-electricity generation. Solar photovoltaic systems directly convert sunlight into electricity,
Figure 7: The largest installed photovoltaic power system (PVPC) capacities of the twenty countries in kilowatts registered with the IEA in 2006. Source: International Energy Agency, Trends in Photovoltaic Applications, Report IEAPVPS T1-16:2007, IEA, Paris, France, 2007, www.iea-pvps.org/products/download/ rep1_16.pdf
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and solar thermal systems capture solar energy as heat in a range of liquids and gases, which are then used to generate high-pressure steam to drive turbines. Silicon-based photovoltaic solar-energy generation is a well-established technology applied to small-scale use, single and multiple dwellings, commercial complexes and large electricity-generating facilities. Germany is currently the largest user of photovoltaic power, followed by Japan and the United States (Figure 7). From 1992 the globally installed photovoltaic power increased from 110 000 kilowatts to 5 695 000 kilowatts in 2006, and it is anticipated that the rate of increase of this capacity will continue to grow rapidly. Solar thermal energy systems range from simple roof-mounted solar water heaters through to major electricity-generating systems that can supply electricity through the night.36 An example of the latter is the Solar Tres power station near Seville in Spain (Figure 8), which is similar in design to Solar Two that operated experimentally for several years in the Mohave Desert in California. Solar Tres is
Figure 8: A simplified schematic of the Solar Tres solar tower sodium nitrate–potassium nitrate molten salt thermal solar power station outside Seville, Spain. The total heliostat surface area is 298 000 square metres and the site area is 142 hectares. Source: JC Martin, Solar Tres, SENER Ingenieria y Sistemas, NREL CSP Technology Workshop, Denver, USA, 7 March 2007, www.nrel.gov/csp/troughnet/pdfs/2007/martin_ solar_ tres.pdf
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based on a field of heliostat mirrors focusing sunlight onto a central tower to heat a mixture of molten sodium and potassium nitrate to 565°C which is circulated through a heat exchanger to produce superheated high-pressure steam to generate up to 17 megawatts of electricity. A large capacity insulated storage tank accumulates molten salt at 565°C during the day such that electricity can be supplied for up to fifteen hours in the absence of solar heating. The annual electricity production is 23 gigawatt hours, and variations in daily and seasonal sunlight intensity are catered for by using a natural-gas back-up heating system. The Nevada 1 solar thermal power plant, which began operating in 2007, has an electricity-generating capacity of 64 megawatts with a capability to provide electricity through the night.37 It uses north to south aligned parabolic solar troughs which focus sunlight to heat mineral oil to 400°C in vacuum-insulated pipes to generate steam for electricity generation. An earlier and impressive demonstration of the capabilities of solar thermal energy electricity generation occurred when, between 1984 and 1990, solar thermal power plants with a total capacity of 354 megawatts using solar troughs where built in the Mohave Desert. Although these plants have little capacity for nighttime electricity generation they have fed more than 10 million megawatt hours of electricity into the Californian grid. 38 A 38megawatt adaptation of these solar trough systems is being applied to produce preheated steam for a coal-fired power plant at Lidell in New South Wales in Australia, and provides an interesting example of the use of solar power to reduce the emissions of fossil-fuel power plants.39 An innovative example of a solar-induced photochemical reaction being used as the heat transfer agent is provided by a solar thermal power plant developed in Australia. In this case a parabolic mirror focuses sunlight onto a photoreactor vessel containing gaseous ammonia under pressure which absorbs heat at 600°C and dissociates over a cobalt/iron catalyst into nitrogen and hydrogen.40 The gaseous nitrogen and hydrogen then pass over an iron catalyst which recombines them to produce hot gaseous ammonia in a similar way to that in which ammonia fertiliser is made. The hot ammonia subsequently passes through a heat exchanger to produce highpressure superheated steam to generate 10 megawatts of electricity.
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The cooled liquid ammonia then cycles back to be reheated before entering the photoreactor to repeat the solar-energy capture process. This system also has sufficient storage capacity to generate electricity through the night. The solar thermal power plant technologies vary considerably and will undergo further refinement as the number of installations grows and competition between the different technologies strengthens. It appears likely that exploitation of this energy source will continue to grow rapidly
The Wind Option Wind power has been used for centuries to pump water and grind corn, and although phased out as cheap oil and electricity became available the old windmills are preserved as picturesque and interesting historical enhancements in the landscape. While the public reception of the sleek, modern, electricity-generating wind turbines is mixed, they represent a very immediate way of harnessing a vast, if intermittent, form of energy. The global cumulative installed wind capacity has increased at a rapid rate from 6100 to 93 864 megawatts in the period 1996 to 2007, with Germany having the greatest national capacity (Figure 9). Denmark presently derives 20 per cent of its
Figure 9: The fifteen largest national electricity generating wind power capacities in megawatts at the end of 2007. Source: Global Wind Energy Council, Global Wind 2007 Report, 2nd edn, Brussels, Belgium, 2008, www.gwec.net/uploads/media/Global_Wind_2007_Report_final.pdf
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electricity from wind power and plans to increase this to 40 per cent. It is anticipated that the increasing global rate of establishing wind farms will see capacity rise to 250 gigawatts by 2012 with the 500 terawatt hours of electricity generated representing 3 per cent of the global total for electricity. Off-shore wind farms with 1000-megawatt capacities currently being built and planned are exemplified by the London Array in the Thames estuary. Generally, wind power is a major component in most proposals for increasing dependency on renewable energy. As an indication of the magnitude of the infrastructure change implied by becoming more reliant on wind power, it would require five million wind turbines producing 15 megawatt hours on a daily basis to generate 27.5 million gigawatt hours of electricity equal to one quarter of the 400 exajoules of energy currently derived from fossil fuels.
The Geothermal Option Geothermal energy in its various forms has been in use for more than a century and in 2005 contributed 1.18 exajoules as direct heat and electricity to world energy.41 It is anticipated that at the current rate of increase in usage geothermal energy, capacity will reach 25 gigawatts by 2030 to produce 174 terawatt hours of electricity annually.42 The most visually spectacular source of geothermal energy is the hot water generated by volcanic activity and movement at the edge of tectonic plates, which give rise to hot springs such as those seen at Yellowstone in the United States, Rotorua in New Zealand and in many parts of Iceland. About 85 per cent of Iceland’s heating is produced from this source. Most geothermal energy sources do not generate hot surface water and are deep underground as is the case with granite ‘hot rocks’ whose energy is derived from the radioactive decay of uranium-238 and its radioactive daughter elements on the long decay route to nonradioactive lead-206. The overlaying rock strata insulate the heat generated, and such granite formations range in temperature from 150°C to 350°C. Pumping water several kilometres down boreholes into fracture zones produces superheated high-pressure steam to drive electricity-generating turbines. Heat extraction in this way slowly cools the granite but generally the formation is so massive that this will take several hundred years before the temperature falls to a level where energy generation becomes unviable.
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A less spectacular but increasingly used form of geothermal energy is through heat pumps, which use the ability of quite shallow substrata to act as an insulated store for heat which remains fairly constant throughout the year. System designs vary with the character of the substrata and climate of the location. By pumping a carrier fluid through sealed pipes, heat may be transferred from the substrata to a building interior or vice versa depending on the season.
The Hydrogen Option Hydrogen, the lightest and most plentiful element in the Universe, in its diatomic form is increasingly looked upon as a major fuel of the future.43 It has the attraction of being a potential replacement for the depleting fossil fuels and of producing water either upon combustion or use in a fuel cell. High temperatures and radiolytic chemistry deep in the Earth’s crust produce hydrogen, which is released into topsoil and oceans where it is used by some micro-organisms. Some biological production of hydrogen amounting to 250–1200 million tonnes annually also occurs, but there are no readily available natural reserves of hydrogen to be exploited for human use.44 Most of the hydrogen currently used is produced directly from natural gas and it contains less energy than that which goes into its production. A by-product is carbon dioxide. This hydrogen is mainly used in the chemical, fertiliser and oil industries. However, hydrogen is now being considered as a transportation fuel to the extent that it could replace seven billion barrels of oil usage annually in the United States by 2040.45 Because natural gas and oil are used as transportation fuels, any production of hydrogen for similar use from fossil fuels is likely to be from coal. The capture and storage of the carbon dioxide produced simultaneously with hydrogen from coal is achievable with current technology, however such production would have the overall effect of deriving less energy from coal than is derived from its direct combustion, and shortening the lifetime of the remaining reserves. As a consequence, hydrogen production together with oxygen from the photolysis of water by sunlight, and the electrolysis of water using electricity generated from renewable resources and nuclear power, are the more probable routes to new large-scale production for use as either a portable or stationary energy source.46 An attractive aspect of hydrogen production by electrolysis of water is that it provides a way
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of storing electricity generated by hydro, nuclear, solar and wind power either from any unused electricity or with specific intent. It is estimated that sufficient hydrogen to power the entire 230 million light road vehicles in the United States could be produced from 380 million tonnes of water annually, which compares with 18 000 million tonnes used domestically, 1140 million tonnes used in gasoline production and 270 000 million tonnes used by fossil fuel and nuclear power plants.47 To generate the same amount of energy that the 9700 million tonnes oil equivalent of oil, natural gas and coal produced in 2007 would require about 3200 million tonnes of hydrogen.48 Because hydrogen results from the transformation of other forms of energy, it is often referred to as an energy carrier. On a weight for weight basis hydrogen carries 2.4, 3.1 and 5.0 times as much energy as natural gas, oil and coal respectively.49 In its unpressurised gaseous form, hydrogen is a convenient fuel for stationary use, but its large volume renders it less convenient for mobile use. Its volume may be reduced by pressurisation or liquefaction but storage costs are high. A range of methods for low-volume storage in composite materials show considerable promise but are some time away from practical application.50 Nevertheless, it is probable that hydrogen generated using renewable resources will become an increasingly important component of the global energy supply.
The Future Human ingenuity tends to come to the fore in times of stress and although we have not yet reached the point of insurmountable difficulty there is no doubt that the longer we take to act to both minimise climate change and ensure security of energy supply, the greater will be the cost. Fortunately, we already have the ability to avoid serious damage on either front using current technology to produce energy from renewable resources and to increase the efficiency of its use.51 Already most of the industrial economies are committing to increasing their renewable-energy dependency to 20 per cent by 2020 and the indications are that a commitment to a 50 per cent dependency by 2050 is possible. Substantial infrastructure changes will be required to achieve these targets.
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It is apparent that many nations see an increase in nuclearpower usage as a part of the transformation of their energy profile. However, the economically exploitable uranium and thorium deposits are finite so that viewed in the longer term, nuclear-fission power is an interim energy resource. This leaves solar and wind energy, with an attendant hydrogen production, as the leading contenders to fill the energy gap as fossil fuels become scarcer and economically less competitive. Tidal and wave power may become attractive options, but at present are not in the van of renewable-energy technologies. If the production of biofuels can be uncoupled from food production they could make a significant contribution to the global renewableenergy resource. Geothermal energy is likely to assume increasing importance where geological features allow reasonable access. The future energy mix will vary between countries depending on their geographic location. It is probable that the gradual change to renewable energy will see a greater dependence on nationally generated energy resources coincident with a decrease in imported energy use. This should lower the probability of conflict over energy resources. Like it or not we have to aim for a largely fossil fuel–free global economy and the accompanying infrastructure changes for all of the reasons explored above and to ensure a good future for the coming generations.
Notes 1
2 3
The international unit of energy or heat is the joule. To raise the temperature of water at 25°C by 1°C requires 4.1846 J. The international unit of electricity intensity is the watt. One kilowatt applied for one hour, or 1 kilowatt hour, is equal to 3600 kilojoules. Both joules and watts are given prefixes as the amount of energy and electricity increases by factors of one thousand. These prefixes are: kilo (103), mega (106), giga (109), tera (1012), peta (1015) and exa (1018). Hence, kilojoule, megajoule, gigajoule, terajoule, petajoule and exajoule; kilowatt, megawatt, gigawatt, terawatt, petawatt and exawatt; kilowatt hour, megawatt hour etc. Oil is traded in barrels, natural gas in cubic metres and coal in tonnes. Because of the very large amount of these fuels traded the relationships between these quantities and their energy content is usually calculated through ‘millions of tonnes oil equivalent’, or mtoe. International Energy Agency, World Energy Outlook 2006, IEA, Paris, France. Stephen Lincoln, Challenged Earth: An Overview of Humanity’s Stewardship of Earth, University College Press, London, England, 2006; James Hansen et al, ‘Global Temperature Change’, PNAS, vol. 103, 2006,
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pp. 14288–93; James Hansen et al, ‘2008 Global Surface Temperature in GISS Analysis’, 2009, ww.columbia.edu/~jeh1/mailings/2009/20090113_ Temperature.pdf; Meteorological Office Hadley Centre, observations datasets, http://hadobs.metoffice.com/hadcrut3/diagnostics/global/ nh+sh/; IPCC, Climate Change 2007: The Physical Science Basis, Cambridge University Press, Cambridge, United Kingdom and New York, USA, www.ipcc.ch/ipccreports/ar4-wg1.htm Hansen et al, ‘Global Temperature Change’; Hansen et al, ‘2008 Global Surface Temperature in GISS Analysis’; Meteorological Office Hadley Centre. Robert W Correll, ‘Challenges of Climate Change: An Arctic Perspective’, Ambio: A Journal of the Human Environment, vol. 35, no. 4, June 2006, pp. 148–52; MC Serreze, MM Holland and J Stroeve, ‘Perspectives on the Arctic’s Shrinking Sea-Ice Cover’, Science, 2007, vol. 315, pp. 1533–6. InterAcademy Council, Lighting the Way: Toward a Sustainable Energy Future, Amsterdam, The Netherlands, 2007, www.interacademycouncil. net/?id=12161 Energy Information Administration, International Energy Outlook 2008, report #:DOE/EIA-0484(2008), Washington, DC, USA, www.eia.doe.gov/ oiaf/ieo Stephen Lincoln, ‘Fossil Fuels in the 21st Century’, Ambio: A Journal of the Human Environment, vol. 35, no. 28, December 2005, pp. 621–7. Lincoln, Challenged Earth; InterAcademy Council, Lighting the Way. IPCC, Carbon Dioxide Capture and Storage, Cambridge University Press, Cambridge, UK, 2005, http://arch.rivm.nl/env/int/ipcc/pages_media/ SRCCS-final/IPCCSpecialReportonCarbondioxideCaptureandStorage. htm; C Philibert, J Ellis and J Podkanski, Carbon Capture and Storage in the CDM, OECD/IEA, 2007, www.iea.org/textbase/papers/2007/CCS_ in_CDM.pdf; EJ Wilson et al, ‘Regulating the Geological Sequestration of CO2’, Environmental Science & Technology, vol. 42, April 2008, pp. 2718–22. Julia Uppenbrink, ‘Arrhenius and Global Warming’, Science, vol. 272, 1996, p. 1122. IPCC, Climate Change 2007: Mitigation, Cambridge University Press, Cambridge, United Kingdom and New York, USA, 2007, www.ipcc.ch/ ipccreports/ar4-wg3.htm IPCC, Climate Change 2007: The Physical Science Basis, Cambridge University Press, Cambridge, United Kingdom and New York, USA, 2007, www.ipcc.ch/ipccreports/ar4-wg1.htm; MR Raupach et al, ‘Global and Regional Drivers of Accelerating CO2 Emissions’, PNAS, vol. 104, 2007, pp. 10288–93; GP Peters et al, ‘China’s Growing CO2 Emissions: A Race Between Increasing Consumption and Efficiency Gains’, Environmental Science & Technology, vol. 41, 2007, pp. 5939–44. A monthly update of the atmospheric CO2 levels at Moana Loa, Hawaii, is provided by the National Oceanographic and Atmospheric Agency (NOAA) through P Pans, NOAA/ESRL, www.esrl.noaa.gov/gmd/ ccgg/tends/
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15 Lincoln, Challenged Earth. 16 ibid. 17 Julia Reinaud and Cedric Philibert, Emissions Trading: Taking Stock and Looking Forward, Organization for Economic Co-operation and Development/International Energy Agency, 2007; Trends & Prospects, Report COM/EN/EPOC/IEA/SLT(2007)9, Paris, France, www.iea.org/ textbase/papers/2007/ET_Trends&Prospects.pdf; DG Victor and D Cullenward, ‘Making Carbon Markets Work’, Scientific American, vol. 297, no. 6, December 2007, pp. 45–51; Nicholas Herbert Stern, The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge, England, 2006. 18 International Energy Agency, Key World Energy Statistics 2008. 19 Lincoln, Challenged Earth. 20 InterAcademy Council, Lighting the Way. 21 International Energy Agency, Biofuels for Transport: An International Perspective, IEA, Paris, France, 2004, www.iea.org/textbase/nppdf/ free/2004/biofuels2004.pdf 22 JPW Scharlemann and WF Laurance, ‘How Green are Biofuels?’, Science, vol. 319, 2008, pp. 43–4; J Fargione et al, ‘Land Clearing and the Biofuel Carbon Debt’, Science, vol. 319, 2008, pp. 1225–37; T Searchinger et al ‘Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change’, Science, vol. 319, 2008, pp. 1238–40. 23 World Bank, World Development Report 2008: Agriculture for Development, Washington, DC, USA, pp. 70–1, http://econ.worldbank. org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTWDRS/ EXTWDR2008/0,contentMDK:21410054~menuPK:3149676~ pagePK:64167689~piPK:64167673~theSitePK:2795143,00.html 24 ibid.; International Energy Agency, Biofuels for Transport. 25 International Energy Agency, Biofuels for Transport. 26 ibid.; J Hill et al, ‘Environmental, Economic, and Energetic Costs and Benefits of Biodiesel and Ethanol Biofuels’, PNAS, vol. 103, 2006, pp. 11206–10. 27 International Energy Agency, Biofuels for Transport. 28 ibid.; J Hill et al. 29 International Energy Agency, Biofuels for Transport; World Bank, World Development Report 2008; RD Perlack et al, Biomass as a Feedstock for a Bioenergy and Bioproducts Industry: The Technical Feasibility of a Billion Ton Annual Supply, Report ORNL/TM-2005/66, Oak Ridge National Laboratory, Oak Ridge, TN, USA, 2005, www.eere.energy.gov/biomass/ pdfs/final_billionton_vision_report2.pdf 30 MR Schmer et al, ‘Net Energy of Cellulosic Ethanol from Switchgrass’, PNAS, vol. 105, 2008, 464–9. 31 A McDonald, ‘Nuclear Power: Global Status’, IAEA Bulletin, vol. 49, no. 2, 2008, pp. 45–8; International Atomic Energy Agency, Nuclear Power Reactors in the World, 2008, IAEA, Vienna. 32 International Atomic Energy Agency, Geological Disposal of Radioactive
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Waste, IAEA Safety Standards Series No Ws-R4, Vienna, Austria, 2006, www-pub.iaea.org/MTCD/publications/PDF/Pub1231_web.pdf International Atomic Energy Agency, Thorium Fuel Cycle: Potential Benefits and Challenges, Report IAEA-TECDOC-1450, Vienna, Austria, 2005, www-pub.iaea.org/MTCD/publications/PDF/TE_1450_web.pdf M Westra, ‘Is Fusion the Future?’, IAEA Bulletin, vol. 48, no. 2, 2007, pp. 29–31. Lincoln, Challenged Earth; International Energy Agency, Trends in Photovoltaic Applications, Report IEA-PVPS T1-16:2007, IEA, Paris, France, 2007, www.iea-pvps.org/products/download/rep1_16.pdf C Philibert, The Present and Future Use of Solar Thermal Energy as a Primary Source of Energy, InterAcademy Council and International Energy Agency, 2005, www.iea.org/textbase/papers/2005/solarthermal.pdf K Lovegrove and M Dennis, ‘Solar Thermal Systems in Australia’, International Journal of Environmental Studies, vol. 63, 2006, pp. 791–802; Acciona company website, www.nevadasolarone.net/the-plant J Mariyappan, ‘Solar Thermal Thematic Review’, Solar PACES Annual Report 2001, ed. M Geyer, Deutsches Zentrum fur Luft- und Raumfart e. V., Köln, Germany, www.solarpaces.org/Library/docs/SolarThermal_ Thematic_Review.pdf Lovegrove and Dennis. ibid; K Lovegrove et al, ‘Developing Ammonia Based Thermochemical Energy Storage for Dish Power Plants’, Solar Energy, vol. 76, 2004, pp. 331–7. Serreze, Holland and Stroeve. Lincoln, Challenged Earth. Argonne National Laboratory/US Department of Energy, Basic Research Needs for the Hydrogen Economy, W-31-109-Eng-38, 2004, http://.sc.doe. gov/bes/hydrogen.pdf; JA Turner, ‘Sustainable Hydrogen Production’, Science, vol. 305, 2004, pp. 972–4. TM Hoehler et al, ‘The Role of Bacterial Mats in Production of Reduced Gases on the Early Earth’, Nature, vol. 412, 2001, pp. 324–7. M Grätzel, ‘Photoelectrochemical Cells’, Nature, vol. 414, 2001, pp. 338–44. ibid.; NS Lewis and GD Nocera, ‘Powering the Planet: Chemical Challenges in Solar Energy Utilization’, PNAS, vol. 103, 2006, pp. 15729–35, vol. 104, 2007, p. 20142. Lewis and Nocera. BP Statistical Review of World Energy June 2008. Hansen et al, ‘Global Temperature Change’; Hansen et al, ‘2008 Global Surface Temperature in GISS Analysis’; Meteorological Office Hadley Centre. Grätzel; L Schlapbach and A Züttel, ‘Hydrogen-Storage Materials for Mobile Applications’, Nature, vol. 414, 2001, pp. 353–8. Lincoln, Challenged Earth; Hansen et al, ‘Global Temperature Change’; Hansen et al, ‘2008 Global Surface Temperature in GISS Analysis’; Meteorological Office Hadley Centre; Serreze, Holland and Stroeve; Wilson
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et al; S Pacala and R Socolow, ‘Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies’, Science, vol. 305, 2004, pp. 968–71; MS Dresselhaus and IL Thomas, ‘Alternative Energy Technologies’, Nature, vol. 414, 2001, 332–7.
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4
Communicating Complexity in the Carbon-Aware World Garth Lamb
The current public enthusiasm for all things environmental, which has been sparked by massive interest in climate-change issues, provides an unprecedented opportunity for experts to educate the general public about complex environmental themes, helping the wider population to better understand the complicated issue of ‘sustainability’. At no point in history have people been more engaged in the debate over environmental problems. This new concern is yet to really translate into significant action—green ideas still feature more prominently in opinion polls than in actual purchasing decisions at the checkout—but now is the time to harness this interest and advance knowledge around the problems. Better information can help society translate sustainable thinking into sustainable living. As with any great opportunity, however, there are also significant challenges to be overcome in the arena of communication, with much of the issue simply that some people will always try to exploit what they can from the situation, without proper regard for the overall impact. As Commissioner John Martin of the Australian Consumer & Competition Commission (ACCC) told a Sydney Green Capital event,
‘there is growing community concern about the environment and the temptation to respond to that concern is flashing like a big green dollar sign for business’. ‘Greenwash’—people falsely using environmental claims to try and sell their product, threatens to massively undermine the legitimacy of real communication about these extremely important issues. If the public becomes jaded, bored or mistrustful because ‘green’ messages are poorly backed up or over-used, then this massive opportunity to help steer society onto a more sustainable pathway could be lost, or at least severely curtailed. The big problem is, however, that in the multifarious realm of environmental communication, there is rarely a clear-cut answer as to what claims can be trusted, and which must be taken with a grain—or a ship load—of salt.
A Question of Numbers In most impact modelling, and especially in the emerging field of environmental economics, the results you get from any study are highly dependent on the information and assumptions you feed in. In a Hyder Consulting study, Joe Pickin looked at forty-two different attempts to run a cost–benefit analysis (CBA) on recycling—a process generally considered to provide a robust analysis of issues because it covers such a wide array of factors. Looking at the assumptions used to draw conclusions, however, Pickin found the assumed price of carbon-dioxide emissions varied between $2.60 and $240 per tonne. Given this massive variation, he concluded ‘the results of CBAs of recycling have depended on analysts’ opinions—or worse, the commissioning agency’s interests’. Members of the general public are hardly going to critically examine the in-built assumptions of complicated modelling systems, but people do quickly become frustrated when faced with opposing information. It is little wonder people start to tune out when it seems every interest group is able to ‘prove’ their particular point of view on any environmental issue. Take, for example, the Business Council of Australia’s (BCA) August 2008 ‘finding’ that the Rudd Government’s
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proposed Carbon Pollution Reduction Scheme would drive three of fourteen businesses studied to the point of collapse. Non-experts—including the media—often lack the skills to critically evaluate such claims and, by the time other experts have poured over the numbers and found the flaws, the damage of such a statement is often done. People see the division in opinions, don’t really know who to trust, and start to put the entire issue in the ‘too hard basket’. A week’s worth of small news snippets from groups dismissing the BCA findings does not make up for the damage done on day one with the report splashed across the front page of major newspapers; even poorly researched, biased and simplistic findings will linger in people’s minds once they make it into the public domain. But who can tell which report is right, which expert is most trustworthy, or even which product is the greenest? The central problem with the whole debate is that environmental topics are, by their nature, complex and, unfortunately, there is no single ‘heart smart tick’ that can be applied to show a product or process is well designed and environmentally friendly.
The Diabolical Dilemma The natural complexity of environmental issues does not stop marketers trying to push simple lines, and again it is little wonder the public is growing confused and distracted when faced with the question of who and what to believe. Take the example of paper. The number-one green claim made about the product concerns recycled content, with consumers most engaged around the topic of deforestation—nothing rouses the greenie spirit like photos of bulldozers pushing down great swathes of the Amazon. But paper production is far from a single impact issue. To see the big picture and really get a handle on which paper product is best for the environment, a range of energy use, water and waste-water management, and waste generation impacts all need to be considered. A 2007 study by the well-respected Access Economics, commissioned by Double A paper, found that—after considering just such a wide range of environmental impacts—the cost to the environment
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of producing paper at Double A’s Thailand facility was $15.87 per tonne (around 4 cents per ream of office paper). This was a tenth of the ‘environmental cost’ of the worst performing mill Access studied (an Indonesian facility which came in at $153.13 per tonne), but was also significantly lower than the environmental impact of recycled paper produced at a leading British facility ($36.38 per tonne), despite the Thai facility using virgin plantation timber. Buying a product with the aim of helping the environment can have the perverse outcome of actually causing more damage if all the issues are not properly weighed and considered—a process that is obviously beyond your average run-of-the-mill supermarket shopper, and often doesn’t make much sense for the brand owners or retailers either. Without even tackling the major problem that such complicated environmental results cannot be easily expressed to consumers, conducting this sort of level of research into a product’s overall impacts is a complicated and expensive process: UK research company Trucost estimates that accurately calculating carbon impacts alone could costs manufacturers some $170 000 per product line. High complexity and cost, already major problems, look even scarier when coupled with a recent Australian Choice magazine study of 185 products, which found 637 green claims between them—each of which would need to be probed if a thorough examination of the environmental claims were to be made. And even then, if the money is spent and a way to actually express the results is found, the same old problem arises that the conclusions cannot necessarily be trusted because they have to be based on assumptions that are subject to personal and commercial bias; there simply is no hard and fast answer to questions like ‘how much is a hectare of rainforest worth’, or ‘what is the value of 1 kilometre of unpolluted natural stream’. Professor Ross Garnaut called climate change a ‘diabolical policy problem’, and the deeper you scratch on any environmental issue the more is revealed about the complexity of the debate. It is a horrendously difficult problem, but all is not hopeless; there may not be any perfect way to communicate the issues, overcome the challenges and blaze one true, straight path forward,
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but there is always a best-practice method. So long as the bestpractice bar keeps going up and we all keep meandering in the right general direction on the sustainability path, we will all get somewhere eventually.
Beyond the Light Bulb For all the reasons already outlined above, it is rarely possible to accurately and independently evaluate the fine detail of the claims made in environmental communication. But there are clearly ways to improve the veracity of claims and help ensure the opportunity to get better traction on environmental topics is not wasted. A position paper prepared by Ecos Corporation for the Total Environment Centre (TEC) suggests three main dimensions to battling the issue of greenwash: self-regulation, including clear guidelines for brand owners and marketing professionals; stronger ACCC action; and incentives for best practice that could include ‘green marketing awards, labelling programs and other positive brand profile opportunities’. The TEC’s associated ‘Green Cred Checklist’ has ten pointers on making safe claims, including checking the truth, materiality, completeness and ability to back up any claims. The ACCC has also updated its guide to green claims, at the same time showing a willingness to crack down on companies making false or unsupported claims. These measures do not provide any knockout blow to dealing with the host of problems surrounding the topic, although they do at least provide some guidance on how marketers and brand owners should act when faced with imperfect information. While the mainstreaming of green products and claims is the obvious face of the modern environmental movement, the opportunities in the brave new carbon-conscious world run much deeper than just finding ways to tap into the $500 billion (and growing fast) annual market for green consumer goods. Tackling what Al Gore called the ‘most pressing issue facing mankind today’, society’s response to climate change needs to go beyond finding better ways to market and sell carbon-neutral beer or low-energy light bulbs. Step change technology is needed, and it is being developed.
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The only way these novel ideas can progress to a point where they disrupt the status quo of unsustainable consumption and allow the community to transition to a more sustainable future is through clear lines of communication between inventers and users.
Unleashing Quality Ideas ‘Try and stand back from your specialist knowledge and remember not all our readers have the same technical background as you.’ It’s a sentence I type out hundreds of times a year but, no matter how hard I try and enforce the point up front, countless people (many engineers) still submit horrendously complicated, poorly worded text any time WME Environment Business Magazine asks for information on new products. Cleantech developers are, by their very nature, on the cutting edge of their field, building products and conducting business in a way that few—if any—have already tried. The risk is that when throwing a completely new concept into the public arena—which is what most start-ups hope to do—the chances of non-experts understanding the revolution are pretty slim. The issue of explaining new technology to non-experts, especially through the media, is just one of the many problems pioneering companies encounter, but one which is commonly overlooked. Despite innovators needing a wider skill set than just inventive thinking to see a good idea become a viable option, many fail to recognise proper communication as a core priority, which is as regrettable as it is understandable. Especially at the early stages where most exciting ideas originate, ‘communication manager’ is just one of the many hats a technology developer needs to wear. There is a clear temptation for ‘one man band’ operations to prioritise other aspects of business development above communication. If pressed however few would argue against the common logic that, unless you can explain your idea well, it isn’t ever going to take off among the wider populace: few planet-changing activities can take place solely in an inventor’s garage. Still, many innovators fail to draw the distinction between what they know about a topic and what an outsider knows (or ever wants to know). It is not only members of the public that tune out when they
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don’t understand something; many journalists do not have scientific training or any deep background in technical areas. Explaining a concept to other people is very difficult when you don’t understand it yourself and, in a notoriously fast-paced industry with tight deadlines and a mass of information to distil into a very limited number of words, concepts that don’t very quickly make sense are not going to get much attention. The technology developer (and any third party trying to pass on the concept) needs to resist the temptation to launch into too much detail when starting out on a topic. By starting simple and providing more detail as the audience begins to want more on specific points, a clearer picture of a new idea can be developed and embraced. This task is made much simpler in the Web-based world, where a mass of information can be hosted online so those with a niche interest can access as much complex background information as they desire. We live in the most transparent world ever, and again this increases the need for the information a company puts out there to be of high quality—faced with a mass of information sources, consumers need not waste time deciphering poorly worded or badly researched information. The rise of corporate sustainability reporting and inclusion of ‘environment’ or ‘sustainability’ sections in many annual reports shows the growing trend for leading companies to put serious effort into communicating their environmental messages. The Global Reporting Initiative (GRI) has pioneered the development of the world’s most widely used sustainability reporting framework, which sets out the principles and indicators organisations should use to measure and report their economic, environmental, and social performance, and it’s a must-read for any group struggling to express complex information. The inventors and experts who recognise the importance of good communication frameworks and who put the time and effort into developing simple, robust ways to express their ideas do still have an amazing and rare opportunity to help educate and inform an interested community. Everyone knows there is no way out of the environmental conundrums we face without engaging the wider public; everyone
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should also recognise there is no way to engage the public without good, clear communication. My fellow contributors to this book include some of those best placed to clearly communicate important environmental concepts and to spread the excitement of the emerging opportunities to a wider audience. There are still many challenges for us all to overcome in developing, proving and selling the sorts of products and ideas that can make a real dent in reducing our environmental impacts. But at every level, from large-scale zero-emission energy generation through to eco-friendly dish soap, the developers and marketers who can combine good ideas with good communication have an unparalleled chance to shape the future by engaging with an eager public.
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Part 2 Community Opportunities
C
ommunities are the first building block of society that has enough scale to make significant differences to the world. Behaviour
change and initiatives by individuals and families are an essential component of change at all levels, and communities are where these initiatives first show themselves. The functions and social norms of communities are extremely powerful. By changing how a community sees itself, the behaviours of large groups of people can be changed swiftly. Conversely, communities can be extremely resistant to change and if not brought in as part of the solution, can effectively block the best of initiatives by all levels of government. Jamie Oliver, the TV chef, knows to his cost the challenge of changing entrenched community behaviour. In his Ministry of Food initiative he tried to get the community of Rotherham in the UK to change its eating habits to create a healthier community with less obesity. While many in the community saw the value in his proposition and even tried to change, most soon reverted to their old ways once the daily routine resumed. One participant on the show stated that she had stopped buying fresh food because she couldn’t afford the bus fare to get to shops that sold anything fresh. Dysfunctional communities with no local shops, built only for those with cars, is therefore one of the drivers of obesity. Maybe only by combining strong community communication with government intervention and sustainable planning initiatives, can long-term changes be secured. This is a lesson for the transition to a low-carbon economy.
Ban Ki-Moon, Secretary General of the United Nations writing in Time in April 2008 discussed the importance of effectively solving local sustainability issues to achieve the required global outcomes. While this focused on issues in the Sudan, the lessons of resolving local issues as part of global solution are highly transferable. Many of the challenges we face, from poverty to armed conflict, are linked to the effects of global warming. Finding a solution to climate change can bring benefits in other areas. A greener planet will be a more peaceful and prosperous one too. The basic building block of peace and security for all peoples is economic and social security, anchored in sustainable development. It is a key to all problems. Why? Because it allows us to address all the great issues—poverty, climate, environment and political stability—as parts of a whole. But Darfur’s violence began with the onset of a decades-long drought. Farmers and herders came into conflict over land and water. If this root problem is not addressed—if the challenges of poverty alleviation, environmental stewardship and control of climate change are not tied together—any solutions we propose in Darfur will be at best a temporary Band-Aid.1 This section considers our communities and how we can build on their strengths and deliver the strong foundations for global change.
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Ban Ki-Moon, ‘The Right War’, Time, 28 April 2008, p. 54.
John O’Brien
5
Building Better Communities Allan Tranter
If the early years of this millennium are remembered at all, they will probably be remembered as the time when a majority of educated people living in economically advanced nations came to accept the reality of climate change. During the 1980s and early 1990s, the notion was emerging slowly but steadily from the category of crackpot science. The 1992 United Nations Earth Summit in Rio de Janeiro heralded the emergence of the environment as a cause célèbre, and the release of Agenda 21—an outline of international consensus on prerequisites for sustainable development—provided a stimulus for both government interest and community involvement.1 By the 2000s, climate change had become a major public-policy issue. Remarkably, however, the drive to address this global dilemma— accompanied by enough rhetoric to fill a hole in the ozone layer—has hitherto overlooked the importance of community. To care about our environment perhaps suggests that we care about the communities of people that inhabit it, just as it suggests that we care about colonies of animals and plants. But is suggestion enough? In my view, we need to turn our thinking on its head. At the outset, we need to explicitly acknowledge that it is because we care about communities that we care about the environment. If the health and wellbeing of communities is foregrounded in this way, it is
possible to see our response to climate change as part of a broader issue—the need to build communities that are involved, resilient and happy.
Fabric? What fabric? Few would dispute that the vast majority of Australians opt for lifestyles that accord with their level of affluence—or, perhaps more precisely, their capacity to borrow. This poses a problem for government in that few people are inclined to effect major lifestyle changes unless they are forced to. Climate change provides a case in point. As long ago as 1994, a survey of nearly thirteen thousand Australians revealed that 71 per cent believed environmental protection to be as important as economic growth, while nearly 18 per cent believed it to be of greater importance.2 At an intellectual level, then, Australians have long cared about the environment—but only the foolish would believe that 71 per cent of Australians have significantly reduced their carbon footprint since 1994. On the contrary, we have become very adept at insulating our personal worlds from the inconvenience of environmental responsibility. While we may believe that public transport is good, many of us continue to act as though it is best for others. Why? The answer lies in our declining sense of community. There are still those who like to believe that communities are comprised of caring, mutually supportive people, taking care of each other and working together for the common good. In today’s Australia, however, those who assume that communities are stable and thriving social organisms thirsty for engagement with issues of importance tend to be those who are themselves engaged with such issues, and who naturally want to believe that ‘most people’ are at least somewhat like themselves. Sadly, a more dispassionate analysis would reveal that, in general, the notions of ‘community’ and ‘social fabric’ belong to another age. Most Australians have lost their sense of community and the recognition of shared responsibility that accompanies it. Worse, they don’t know how to get these things back, even when they want to, and expect governments and large institutions to fill the void. Environmental responsibility is part and parcel of social responsibility—and if everything is the responsibility of someone else, so too is climate change. The charge that we live in a ‘nanny state’ is not
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unfounded, but few people realise that government interventions are part of a complex dialectic. As much as legislators may want to justify their existence by passing laws, they are also constrained to regulate when social responsibility wanes—that is when behavioural trends seem injurious to the common good. Legal obligation then casts its shadow on aspects of life that were previously the province of social responsibility, and compliance or evasion replaces the impulse to think and act according to conscience. Our need for the discipline of a ‘nanny’ becomes ever greater, and so the likelihood of further legislation increases. It’s a difficult cycle to break. Therein lies a quite considerable problem for anyone striving to save our planet. Climate change may be compromising the planet our children will know, but for now communities only want to know how government action on climate change will affect individual incomes, businesses and lifestyles.
The Thing about People and Things Why is it that community exists only as a notion in the urban Australia of the twenty-first century? How has this happened? Clearly, there are many causes. One important factor, often overlooked, is that people are more nomadic than they once were, so that most Australian communities are characterised by greater transience. Whereas once it was common for couples to move house once or twice in the course of an enduring union, it would now be unusual for a married couple to relocate less than five times. Later first marriages, higher divorce rates and faster transport have all contributed to the relocation frenzy, eroding both the connection of people to place and the depth of relationships within communities. Another causal factor is the malaise we know as ‘affluenza’, a term popularised by John de Graaf and defined as ‘a painful, contagious, socially transmitted condition of overload, debt, anxiety and waste resulting from the dogged pursuit of more’.3 The sad belief that more things buy more happiness has motivated people to work harder and longer, consequently diminishing time for relationships and community involvement in all its forms, including volunteering. The result of this, I would argue, is the equivalent of a crippling tax on one of our most valuable resources: human capital.
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To make matters worse, this focus on things rather than people is reflected in the priorities and capabilities of governments and local governments, which are generally quite competent with things (the physical constructs of society, or neighbourhoods) but less than wonderful when it comes to people (social constructs, or communities). Urban planners believe that ‘design solutions’ will solve our society’s social and economic issues, but this is fanciful. Beautiful places can be more dysfunctional or more isolating than unsightly places, while many traditional communities have achieved harmony, efficiency and resilience without the benefit of planning. This tendency to overlook human dynamics is equally evident in sustainability agendas. Regrettably, ‘sustainability’ has become synonymous with ‘environment’—implying an exclusion of social concerns. Moreover, on the rare occasions when discussion on social sustainability occurs, it tends to be suffocated by checklists comprised of things—transport, schools, facilities and so on. Consequently, social sustainability is reduced to a consideration of buildings and infrastructure, and is too infrequently about building community. We need look no further than the Rudd Government’s proposal to build ‘family centres’, and the Australia 2020 Summit’s recommendation for ‘parent and children centres’ that would offer ‘a place-based culture that offers integrated services and community support’.4 In essence, such thinking reduces the needs of families to bricks and mortar—new public buildings which most communities and local government authorities (LGAs) neither need nor can afford to manage and maintain. The construction of family centres may fit the bill as an election promise, but is unlikely to contribute much to the wellbeing of families, communities and society. In the same way, ‘green’ undertakings appeal to an electorate that theoretically embraces the idea of becoming greener, but hold out little hope of motivating communities to control their own destinies.
Climate Change—Just Another Sanction? There will be those who argue that strong, vibrant communities need not be a prerequisite for widespread commitment to climate-change initiatives. This too is fanciful. Such arguments are predicated on an assumption that people not only believe what they are told, but are prepared to let ‘experts’ profoundly influence individual attitudes
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and behaviours. Quite the opposite is true. The general public has never been more sceptical of academic opinion, which is perceived as lacking pragmatism and being comprised of numerous conflicting views. The media is equally suspect, while the advice of politicians is seen as worthless and, more often than not, the mask of an ulterior motive. While the public’s scepticism is often justified, a consequence of it is that ‘community education’ has become more difficult than ever. Indeed, it is hard to imagine circumstances that would make tackling climate change more challenging. As a result, action on climate change will take the form of government-imposed sanctions, with communities, organisations and individuals forced by decree to comply with a catalogue of directives deemed to be for the good of everyone. That may be better than no action at all—but clearly falls well short of an ideal scenario, in which networks of engaged and connected communities would, of their own volition, take action locally to demonstrate responsibility for reducing and monitoring the impact of today’s lifestyles and decisions on tomorrow’s global environment. According to Mark Connelly, writing for Sydney’s Centre for Policy Development in March 2008, the Howard Government’s ‘Climate Clever’ public information campaign was fundamentally lacking because it underestimated the power of what might be termed ‘observational learning’ or ‘social diffusion’: Essentially, we are talking about peer pressure, or the ‘keeping up with the Jones’ theory of social behaviour. If you look to the house on your right, and it has a rainwater tank, and you look to the house on your left, and it has a rainwater tank, and at the next barbeque all your friends are talking about their new rainwater tanks, then you are more likely to go out and get a new rainwater tank … Perhaps the ‘Climate Clever’ campaign attempted to emulate this effect by portraying those who could be our friends and neighbours taking environmentally responsible action, but that could not replace the impact that real friends, family and neighbours can have on our decision making.5
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Connelly argues that the best way for governments to promote social diffusion is ‘by going as local as possible’, urging the Rudd Government to be ‘climate cleverer’ by moving beyond passive publicity to ‘direct engagement with local communities, personal contact and the encouragement of neighbourly competition to attain the most environmentally friendly household’.6 Case studies bear out the wisdom of this approach. In 2000, for example, the Western Australian Government’s land and property developer, LandCorp, earmarked a 115-hectare tract of former grazing land in Perth’s southern suburbs for a special kind of housing estate. The goal was to establish the commercial viability of a development that reflected a practical and meaningful commitment to environmental excellence. Blocks at Harvest Lakes were orientated to assist passive solar construction, and GreenSmart houses were mandatory. A ‘community and environment centre’ was built early, featuring recyclable materials, thermal wall storage, cavity wall insulation, ventilation louvers, energy-efficient lighting, solar hot water, grey-water recycling, and a rainwater tank. Adopting the slogan ‘Change Your World’, LandCorp exhorted people to make healthy lifestyle choices, live greener, and connect with others in their community. Buildings and slogans, however, were never going to be enough. To work effectively, the development required an investment in social planning, with a strong emphasis on intentional community formation and social sustainability. The experiment was a runaway success. Buyers flocked to the estate and wore its environmental credentials like a badge of honour. Over time, significantly, the social environment nurtured measurable increases in commitment to the natural environment. In 2006, a community survey indicated that approximately 3 per cent of residents had attended an event linked with the environment prior to moving to Harvest Lakes, while 19 per cent had attended at least one event or activity associated with environmental sustainability since their arrival. In addition, 40 per cent of respondents flagged an interest in attending environmental education programs in the future.7 As the Harvest Lakes development demonstrates, Connelly’s injunction to ‘go as local as possible’ is the ultimate no-brainer. Sadly, governments generally don’t seem to get it—and even when they do,
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engaging with communities looks too much like hard work. The easier options of advertising and sanctions sit more comfortably within bureaucratic thinking, and the bigger job of consulting and engaging communities to build social capital is neglected. In order to address looming challenges, both global and national, we need the courage to choose our future. Against alienation we must pit commitment, and a collective desire to be involved. Against powerlessness we must pit control, or influence. And against stagnation we must pit readiness to rise to social challenge. We have reached competence in the building of things, and must now accept a responsibility to apply resources to the development of communities, equipping them to cope with whatever the future brings.
What Can Local Government Do? There is real potential to use the climate-change dilemma to build hardy communities and, as the tier of government most intimately connected to communities, local government has an important special role to play. Ironically, local government authorities (LGAs) must recognise that significant risk is attached to a ‘risk management’ approach. If LGAs adopt policies, regulations, programs and activities to mitigate risks associated with climate change while the majority of the population remains disengaged, they will have no option but to take the blame when things fail. Australian LGAs of the twenty-first century must strive for a holistic approach. A raft of policies and strategies on climate change, peak oil, food banks, affordable housing, water, natural resources and so on will achieve very little, and ‘silos’ have the capacity to destroy the whole. Those in local government must no longer be driven by the regulatory impulse, and must shred their sustainability checklists. Great ideas should not be allowed to die because of policy and regulations developed in a different era, when the greatest need in this era is a commitment to working in partnership with the commercial sector and communities. To some extent, LGAs need to shift their focus from building things and delivering services to people, and instead focus on the building of a real sense of local community, delivering far more valuable social outcomes without much prompting. Inclusiveness is the key. A smart LGA will approach
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looming challenges—local, national and global—by recognising the importance of reducing its emphasis on telling people and, at the same time, increasing the accent on working with people. When we talk about climate change or sustainability, we must go back to the basics. Social capital, wellness and quality of life are not separate from our capacity to adapt in creative ways to shared problems, but determinants of it. The forgotten element in the sustainability agenda is by far the most important element—people. For LGAs, and indeed for other tiers of Australian government, there is an urgent need to realise that shoring up a future is primarily a matter of doing relevant things together.
Notes 1
2
3 4 5
6 7
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United Nations Department of Economic and Social Affairs, Division for Sustainable Development, Agenda 21, United Nations, Geneva, 1992, www.un.org/esa/sustdev/documents/agenda21/english/agenda21toc. htm W McLennan (ed.), Year Book Australia 1996, ABS, Canberra, 1996, p. 388; Matt Beckett et al, City of Subiaco State of the Environment Report, Murdoch University, Perth, 1998, pp. 2–3. John de Graaf et al, Affluenza: The All-Consuming Epidemic, BerrettKoehler Publishers, San Francisco, USA, 2007. Department of the Prime Minister and Cabinet, Australia 2020: Final Report, Commonwealth of Australia, Canberra, 2008, p. 12. Mark Connelly, Can the Rudd Government be Climate Cleverer?, Centre for Policy Development, 2008, http://cpd.org.au/article/can-ruddgovernment-be-climate-cleverer. See also S Coltrane, D Archer & E Aronson, ‘The Social-Psychological Foundations of Successful Energy Conservation Programmes’, Energy Policy, April 1986, pp. 133–48. ibid. Creating Communities Australia, The Community Yield: Harvest Lakes from Vision to Fruition 2000–2008, Perth, 2008.
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6
The Carbon Economy A New Imperative for Acting Locally Maggie Hine
Introduction Since the inception of the International Council for Local Environmental Initiative’s (ICLEI) Cities for Climate Protection (CCP) program in 1998, local governments throughout Australia have been taking a proactive role in achieving greenhouse-emissions reductions at the local level.1 It has been reported that between 1998 and 2008, councils involved in the CCP program had invested $203 million in greenhouse emissions–reduction activities and achieved 18 million tonnes of CO2e abatement. The total energy savings achieved in this period was reported as $95 million.2 These reductions have been achieved through mitigation measures in councils’ own operations (focused on reducing emissions from buildings, street lighting, fleet and waste sources) and in the local area (focused on energy conservation and efficiency initiatives targeted at households and local business). Until recently the imperative for this action by local government has predominantly been a response to community expectations and legislative requirements regarding environmental sustainability issues. The pricing of carbon now provides a stronger economic and
financial incentive for local government to further invest in emission reductions, including revenue-generating and local employmentcreation opportunities. The triggers for greenhouse abatement at the local level have shifted from a predominantly environmental imperative to a convergence with economic and social ones. It is for this reason that there are a growing number of examples of councils that have a strong economic and financial basis to their climate-change response, including a strengthening relationship with local business. Even in the current global financial situation investment in low-carbon industries is a necessary part of structural adjustment. In this context new opportunities are emerging for local government to take a more active and strategic role in developing local low-carbon economies. This includes opportunities to work with the private sector to support the growth in environmental industries that generate green jobs. While the focus of this chapter is on issues relating to emission reduction in local government, it should not be forgotten these activities assist councils and local communities to be climate resilient and more able to adapt to the consequences of climate change. After all, many of the impacts of climate change require local adaptation responses that relate to local government roles in transport and landuse planning and infrastructure, property, asset and natural resource management.3 This chapter explores how local government has and continues to harness opportunities for innovation in responding to climate change, what the barriers have been and discusses some of the opportunities and uncertainties for local government in the emerging Australian carbon economy.
Local Government Sector The local government sector in Australia includes individual councils, regional and state associations and the peak national body, the Australian Local Government Association. There are around seven hundred local councils in Australia accountable to a diverse range of metropolitan, regional, rural and indigenous communities. Of these, 539 are regional/rural councils. In 2006 the local government sector had an annual expenditure of approximately $20-billion, representing
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2 per cent of gross domestic product, and employed 1.3 per cent of the national workforce.4 Local government therefore plays a significant role in local and regional economies, although the scope of these roles is, in large part, determined by state and territory legislation. Councils are not recognised in the Australian constitution. State and territory legislation defines their roles and responsibilities. The range and scale of services provided by local government therefore varies between states and territories and regions. However, some common roles include the following: • • •
• •
land-use planning and development control; construction and maintenance of key infrastructure including roads, bridges, drainage and waste-management facilities; regulation of local communities (for example, inspection, licensing and regulation of business premises and animal and noise control); environmental management and planning; and provision of services such as care of the elderly and recreational facilities.
In addition to these functions local government also performs the following roles: • • • •
advocate and leader for the community; agent for the delivery of services for other spheres of government; facilitator and coordinator of initiatives and services delivered at the local level; and information provider.
The functions described above therefore determine what role local government can play in the carbon economy. In particular this may include reducing emissions from the transport, energy and agriculture sectors that are responsible for most of the greenhouse emissions in Australia. Given the national imperative to focus emissions reduction measures in these sectors, local governments’ key roles in a carbon economy can be described as follows: •
Planning for a carbon economy : land-use and transport planning and management of infrastructure, assets, ecosystems and
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•
•
•
natural resources (including waste management) that reduce emissions and increase climate resilience. Low emissions procurement: influencing the supply of lowemissions goods and services in the market, and localising the supply chain. Strategic and collaborative approaches: integrating climatechange considerations in all strategic planning, including economic development plans, and facilitating collaboration with the private sector to minimise emissions and build climate resilience. Leadership, advocacy and partnership: demonstrating leadership through reducing emissions from its own operations and services, and supporting community and business responses through partnerships and advocacy.
Using the findings of the Stern Review, the United Kingdom’s Local Government Association commissioned research to identify the economic impacts (opportunities and risks) of climate change on local economies. The research findings are intended to assist local government to develop local economic development strategies that explore new market opportunities and to identify the investments needed to ensure successful adaptation to the impact of rising fuel and energy costs. The research has identified the following opportunities: • • • • •
improving the energy efficiency and resilience of the building stock; developing new energy skills and services to encourage the take up of energy-efficient measures; carrying out research and development of new low-carbon technologies; supporting decentralised energy options; and, developing local supply solutions.5
These findings reflect a shift that is also occurring in Australia where local governments are increasingly taking an active role in economic development issues. With a few notable exceptions, this work is still in its infancy but has growing potential to generate carbonrelated revenue streams and to increase investment in energy
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efficiency, renewable energy and offset measures, which have flow-on benefits for the local economy including creating green jobs. The UK research found that jobs in the renewable energy market would grow from 16 000 to 133 000 by 2020 to meet the national government’s renewable energy targets. A further 20 000 new jobs in the residential energy-efficiency sector were also estimated.6 Equivalent research is yet to be completed in Australia but would be of much benefit to all parties involved in local economic planning, particularly given Australia’s comparative advantages in renewable energy (solar and geothermal as examples), the existence of mandatory renewableenergy schemes and targets, and the inclusion of energy-efficiency requirements in the national economic stimulus package. There is a strong financial imperative for councils to seek returns on investments in the carbon economy. Councils have been under financial pressure to deliver a growing number of services and infrastructure that underpin local communities and economies. A reduction of the cost base through efficiency-improvement programs and improved return on investments through carbon credit generation can improve the financial sustainability of councils. There are a growing number of examples where councils have structured their budgets to mobilise resources to fund climate-change responses. Examples include revolving funds established by the Cities of Newcastle and Hornsby (New South Wales) and the Climate Change Response Fund established by the City of Onkaparinga (South Australia).
Implications and Opportunities for Local Government from the Carbon Pollution Reduction Scheme The Australian Local Government Association (ALGA), the peak national body for local government, commissioned Deacons to research the impacts of the Carbon Pollution Reduction Scheme (CPRS).7 This research has identified the following implications and opportunities for local government. The inclusion of the waste sector in the CPRS means that councils that operate landfills that trigger the CPRS emission threshold will need to purchase carbon pollution permits or seek to reduce emissions. The CPRS White Paper proposed that the waste sector be covered under the CPRS in the following ways:
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• •
•
facilities that have direct emissions above 25 000 tonnes of carbon-dioxide equivalent; landfill sites that emit 10 000 tonnes and operate within 80 kilometres from another operating landfill sites. Operators of sites that have closed prior to 2008 will not be covered; and legacy emissions that are created from past emissions are excluded until 2018.
In its submission to the CPRS Green Paper, the ALGA cited Australia Institute figures that estimated that, at a carbon price of $20 per tonne, the inclusion of the waste sector in the CPRS could add an additional $344 million annually to the operational cost of local government (an extra 1.8%). ALGA notes that these ‘costs do not take into account additional costs of future adaptation or disaster mitigation measures that will be required to cope with climate change’.8 To meet their financial sustainability obligations councils will have to pass these costs on to local communities through fees, charges and rates. This will compound any price impacts on households and communities, although there is an opportunity for these costs to be defrayed through CPRS compensatory measures that are targeted at local government and communities. However, this also creates an added incentive for local government to accelerate greenhouse emission–reduction efforts and to reduce the cost impacts and, by reducing emissions below any relevant thresholds, potentially cease any liability under the CPRS. The Deacons report notes that ‘if Councils have a direct liability under the CPRS and are required to purchase permits to cover these emissions, they may need to consider if they need to participate in the secondary market (i.e. purchasing futures and other derivative products)’.7 However, this option is dependent on the legislation and regulation governing councils’ financial arrangements. The inclusion of offsets in the CPRS is also relevant to local government as waste facilities captured by the scheme will not be able to create tradeable offsets. Councils may be able to create carbon offsets from landfills closed prior to June 2008 by capturing methane for energy generation. However, ‘landfill gas to energy’ projects that have been developed for operating facilities using business cases that assume planned income from the on-sale of Renewable Energy
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Certificates (RECs) may become uneconomic. This penalises councils and operators that have taken early decisions to innovate. Other opportunities lost from the inclusion of waste in the CPRS include the following: • • • •
the recovery of embodied energy in materials (recycling); the capture of landfill gas to reduce methane emissions; the avoidance of landfilling of organic materials (green waste and food waste); and the generation of renewable energy from waste.
The Australian Council of Recyclers undertook a net benefits assessment of the recycling industry in July 2008. It concluded that the recycling industry had a direct turnover in the 2006 calendar year of $11.5 billion, with a ‘knock-on’ effect to jobs and industry of $55 billion. It also found that recycling resulted in abatement of greenhouse emissions equivalent to 8.8 million tonnes of carbon dioxide. Greenhouse-reduction imperatives therefore have the potential to be a key policy driver for waste management and the encouragement of ‘waste to energy’ technologies. However the early inclusion of this sector in the CPRS will inhibit this investment and jobcreation opportunity in the carbon economy. The only incomegenerating opportunity from the CPRS for councils arises in the forestry sector. If councils own forested land and plant new forests for a carbon purpose they may be eligible to receive free permits that can be sold on the market defined by the CPRS. Opportunities also still exist for local governments to engage in the voluntary carbon market, either as purchasers of offsets to achieve carbon-neutral targets or as a generator of offset credits. An emerging area of activity is in the ‘pooling’ of greenhouse abatement and carbon credits measures between councils and their communities to achieve more effective economies of scale, increased revenue generation and improved access to trading markets. An example is the Local Government Emissions Trading Scheme (LGETS) in New South Wales established by Randwick City Council. LGETS is a small-scale, voluntary ‘cap and trade’ scheme, which currently involves a number of councils. Participating councils are required to have accurate and verifiable emissions accounts and
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agree to achieve a collective greenhouse emissions–reduction target of 20 per cent across the aggregated total over a five-year trial period. The scheme covers the councils’ operations only, and trading and business rules are currently under development. The benefits to participating councils are described as follows: • •
•
collaboration with other councils in achieving emissions reductions; applying emissions trading principles to voluntary scheme ahead of any mandatory or imposed trading conditions or other scheme; and gaining expertise and experience in emissions trading.9
The scheme may provide credits that the other councils could purchase to fulfil annual carbon-neutral commitments. The LGETS is yet to be tested but its inception is another example of local-government leadership capacity in preparing for a carbon-constrained future. There is also an excellent opportunity for local government, especially in rural and regional areas, to become ‘carbon pool managers’ for their local regions.10 ‘Carbon pools’ would involve bundling a number of small sequestration projects from land managers and holders together and getting the credits verified as a single project. Such an approach can assist local government in achieving natural resource management and biodiversity outcomes for their communities, as well as providing a potential income stream via the sale of carbon credits. The City of Townsville in Queensland has recently participated in an innovative plan, called Carbon Townsville that includes ‘carbon pooling’ and aims to position the city as a carbon-neutral capital in regional Australia. Central to the plan is the creation of a Townsville Carbon Exchange to tap into the potential $1-billion carbon trading industry in northern Australia. The plan is proposing a communitybased enterprise through which industry and the community can generate and trade carbon credits generated by the large-scale use of carbon-abatement measures. These include soil carbon sequestration in local council parks and gardens and the north’s extensive agricultural industries, as well as energy-efficient practices and uses of renewable energy in business and industry. Revenue generated
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through the Townsville Carbon Exchange will provide ongoing funding for sustainability projects in the region.
Barriers and Uncertainties The key uncertainty facing local government at present is that it is dependent on a high level of partnering with other spheres of government, councils and the private sector to achieve substantial emissions reductions and for unlocking capital for investment. However, this is an area that local government has a proven track record in as ‘trusted broker, targeting help and securing scale efficiencies’.11 This is one reason why it can be expected that local government’s role in the carbon economy will increasingly be delivered through regional approaches that feature a degree of public and private sector collaboration. Such approaches avoid the risk of duplication and resultant inefficiencies impacting on return on investments. It is inherently difficult for individual councils to stay abreast of the rapidly changing climate-change science and policy response. Local government, just like any other sphere of government or business, has a high dependency on accurate and timely information and for clear policy directions being set by state and national governments. Without this timely and accurate information being made available at the local level and policy certainty being provided, local government’s contribution to the carbon economy will be compromised.
Case Studies that Demonstrate Local Government’s Roles in a Carbon Economy The following case studies are provided to briefly illustrate the scope of local government’s role in the carbon economy. Procurement In a carbon-constrained future there is an increasing need for local supply chains that reduce negative externalities associated with supply of goods and services. Local governments’ collective purchasing power represents a key market lever in creating demand for low-emissions goods and services (particularly in the construction
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and maintenance of large infrastructure and assets and in the uptake of renewable energy). This market influence is particularly important if councils are to realise low-carbon aspirations that may include reducing emissions from outsourced services and operations. Local Government and Shires Associations (NSW), Sustainable Choice Program The Sustainable Choice program is a partnership between the LGSA and the NSW Department of Environment and Climate Change. The program aims to build sustainable purchasing capacity within the local government sector through staff peer education and information sharing. This includes the holding of workshops, seminars, product expos and training of council staff. A free web-based database of sustainable products is available to help council staff locate sustainable products and services. The LGSA has reported that the local government sector in NSW alone spends approximately $5 billion per year buying goods and services. South Australian Council’s Green Power Purchase Thirty-eight South Australian councils (over 50 per cent of all councils in the state) have entered into a joint contract to purchase 20 per cent of their electricity needs as accredited GreenPower. These councils account for 80 per cent of total local government’s electricity purchase in the State. The Local Government Corporate Services and the State Government Contract Services negotiated the contract. It is estimated that if all South Australian councils achieve this percentage of greenpower purchase it would reduce greenhouse emissions by 24 600 tonnes per annum. Strategic and Collaborative Approaches Hornsby Shire Council, NSW—Business Energy Savings Program Hornsby council has partnered with the Global Sustainability Initiative (GSI) to deliver an energy-efficient program to small and medium enterprises in the council area. GSI’s existing partnerships with the Australian Institute of Refrigeration, Air Conditioning and Heating and financial-service providers are being used to deliver a program of energy audits on a fee-for-service basis and access to funding and investment opportunities (including carbon trading) that reduce the
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greenhouse intensity and improve the financial performance of the participating businesses. Under this model the council is financially independent from the project other than in-kind support and a small commitment for publicity and promotions. City of Onkaparinga, SA—Carbon Park This project is in its development phase. Carbon Park is the proposed site of the City of Onkaparinga’s new low-carbon industry hub, which is targeting the next generation of low-emissions industries. This includes attracting new investment in the cleantech industry, research, and skills development. Anticipated benefits of the project: • • •
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renewable energy and fuel generated onsite; synergy with neighbouring cleantech operations; potential access to ultra-pure desalinated water (dependent on the location of Adelaide’s desalination plant at Port Stanvac), as well as harvested rainwater and recycled water; association with leading industry names through the Carbon Park brand.
Leadership, Advocacy and Partnership: Working with Community and Business Local government is often referred to as the level of government that is closest and most accessible to the community. It also plays a strategic role in facilitating partnerships with other public, private and non-government partners. Local government is therefore in an excellent position to assist local communities and businesses to prepare for a carbon-constrained future. City of Moreland, Victoria—Moreland Energy Foundation An example of this assistance is the Moreland Energy Foundation (MEF), which is an independent not-for-profit organisation established by the Moreland City Council to help reduce greenhousegas emissions across the municipality. MEF works with households, businesses, schools and community groups by providing the following: • •
advice, training, consultancy services and advocacy work; resource guides and information kits;
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• •
the Five Star Home Renovator’s Service; and detailed energy audits and recommendations.
Conclusion The local government sector’s role in the carbon economy is an emerging one that has a strong foundation in existing achievements in greenhouse-emissions reductions. While there are a plethora of excellent examples of localised responses, local government’s role in facilitating regionally coordinated approaches are likely to become a key feature in the transition to a low-carbon economy. This includes the need for local economic development strategies and plans to include climate-change imperatives to ensure local economies are resilient to price and structural impacts. Investment in emissions reduction and adaptation measures now means that the local government sector and individual councils are better prepared for the carbon-constrained future. This preparedness is of direct benefit to local communities and businesses that rely on the delivery of local government operations and services. The carbon economy is a new imperative for ‘thinking globally and acting locally’ and delivering initiatives regionally.
Notes 1
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CCP is a collaborative program between ICLEI , the Australia Government and councils. As of June 2007 it had 221 participating councils. These councils use the CCP milestone framework to achieve quantifiable emissions reductions. This involves undertaking an inventory, setting reduction goals, creating and implementing local action plans, and monitoring and reporting on progress. ICLEI Oceania, Cities for Climate Protection Australia: Measures and Evaluation Report, ICLEI Oceania and Australian Government, 2008. Australian Greenhouse Office, Climate Change and Adaptation Action for Local Government, Australian Government. Canberra, 2007. Price Waterhouse Coopers, National Financial Sustainability Study of Local Government, Australian Local Government Association, 2006. P Mind, Climate Change and Local Economies, presentation to Small Change, Big Difference Conference, Local Government Association, UK, 2008. Local Government Association, Creating Green Jobs: Creating Local Low Carbon Economies, UK, 2008. Deacons, Briefing Paper on the National Greenhouse and Energy Reporting Scheme, Carbon Pollution Reduction Scheme and Complementary Measures, Australian Local Government Association, 2008.
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J Pritchard, Submission to Carbon Pollution Reduction Scheme, Green Paper, Australian Local Government Association, 2008. 9 Council Report: Proposal to Participate in the NSW Local Government Emissions Reduction Scheme, City of Randwick, 2007. 10 Balance Carbon, Local Government’s Role in Climate Change, South Australian Local Government Association, 2008. 11 Mind.
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Assumption Traps and a Future Vision Andrew Dickson
Over the last four years I have become actively involved in a variety of activities related to environmental sustainability. Since 2004 I have worked professionally as a wind-farm developer. Since 2006 I have presented widely on climate-change issues as one of Al Gore’s volunteer ‘Climate Change Messengers’. And since 2007 I have worked on a community level with sustainable transport advocates, peak oil proponents and permaculture practitioners. This paper is a brief presentation of some of my insights into the root causes of the converging crises of climate change and peak oil, and in light of these insights and my own experiences, presents my own vision and wish list for ways in which we may adapt and thrive in a carbon-constrained future.
Assumption Traps Human folly often results from acting on wrong assumptions. Individual and collective activities all involve certain assumptions, and when these assumptions are wrong, the consequences can be unintentionally negative. In my view, there are several wrong assumptions that have underpinned the development of our modern lifestyles over the last century. We will not be successful in our efforts to address climate
change and peak oil until we understand and confront these assumptions and their consequences. Energy Abundance Almost every aspect of our lives depends on the availability of cheap energy—primarily in the form of oil. Oil is just such a wonderful substance, not only because of its high-energy density, but because at ambient temperature and pressure it is a liquid, making it easy to transport and store. Its use has, therefore, become so widespread that it is virtually impossible to think of an aspect of our lives that does not consume oil, either directly or indirectly. The food we eat requires oil inputs at virtually every step along the food-production chain: growing, transporting, processing, packaging and retailing. Oil not only fuels the tractors and trucks, but is also a key input for fertilisers and packaging. As oil becomes scarce and therefore more expensive, the oil inputs at each stage of the foodproduction chain increase in price, forcing significant increases in the end price of food. There is, therefore, a fundamental lack of resilience between this approach to food production and a variation to the availability of its primary driver: oil. Oil-dependent forms of centralised food production also generate a range of other environmental impacts, including the loss of native terrestrial flora and fauna, loss of biodiversity in food crops, soil erosion and salinity, and degraded waterways and aquatic life. The human health, social and economic ramifications go even further: compromised vitamin and mineral content in fruit and vegetables, reduced freshness of produce at point of sale, diminishing farm profits, rural unemployment and the gradual drift of rural populations towards the cities. Many of our houses are also testament to abundant-energy thinking. Instead of routinely incorporating the basic tenets of good house design (passive solar design, thermal mass, cross-flow ventilation and insulation), we design houses that are cheap to build or are pleasant to look at, but that require regular air-conditioning or heating to maintain comfortable living conditions. In addition, the majority of our new housing stock is designed to last for only one or two generations, so we do not maximise the return on the embodied energy invested in our construction materials.
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Our forms of personal transport are almost entirely oil dependent. Internal combustion engines have been in continuous technological development for over 100 years, yet they still have an energy conversion efficiency of only about 20 per cent. And it is still virtually impossible to buy a vehicle that does not possess an internal combustion engine. As with food, personal transport lacks resilience to oil shortages and corresponding price increases. We were shocked in early 2008 when global oil prices exceeded US$140 per barrel, which resulted in prices at the petrol pump in Australia of A$1.70 per litre or higher. With diminishing global oil production and rapidly increasing global demand, significant price increases for oil are a guaranteed part of our energy future. The water we drink often has a much higher energy input than most people realise. Much of the mains water in Adelaide, for instance, is pumped hundreds of kilometres from the River Murray, which requires huge energy inputs and of course results in significant greenhouse-gas emissions. Australia is about to add large desalination plants to several capital cities, and yet the emissions-intensive water that this produces (‘bottled energy’) will not only be used for human consumption, but also for toilet flushing and watering of gardens. If these energy inputs were expensive and scarce, we would not dare approach our water supplies in this way. These are just a few examples of how our lifestyles reflect the assumption that energy is, and will remain, readily and cheaply available to us. The Sanctity of the Individual Our culture sanctifies the value of the individual, sometimes to the detriment of the wider society. We seek to own our private patch of dirt and to possess resources and assets for our own exclusive use, and we seek to limit the need to negotiate, communicate or compromise with others. We see this in demographic changes such as the shrinking numbers of occupants per household, coinciding with the ever-expanding size of individual dwellings. We see it in empty car seats making up the majority of peak-hour traffic on increasingly congested roads. And we see it as individual family members passively consume individual, pre-packaged meals and entertainment in separate rooms of
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sprawling houses, rather than coming together over a homemade meal to actively share daily experiences, reflect and generate new ideas. It could be argued that our form of democratic government is partly a consequence of the sanctity of the individual. We generally eschew big governments that impose restrictions upon our personal and corporate freedoms. Economic rationalism also remains a dominant part of our collective decision-making, often with environmental consequences that affect us all. The Growth Imperative Our economic model, and our general thinking, is premised upon the need for continual growth and competition. Market share, annual profits and dividends are all expected to grow year by year for our commercial endeavours, personal investments and retirement planning to be considered successful. We have overlooked the fact that our economy depends on resources that are finite. Commodities such as iron ore and copper are finite. Water is finite. Geographic space is finite. Growth that depends on these finite resources is therefore, ultimately, unsustainable. While national and world populations have been relatively small, it has been easy to be lulled into thinking that there will always be more land, water, oil and minerals just waiting to be discovered. But today the world feels like a smaller place than ever as our countries, corporations and communities compete over dwindling resources, and the ‘undiscovered’ realms shrink in relation to those parts of the globe that are now overrun with people. The process of exploration for new mineral and energy resources, on our planet and beyond, now consumes so much energy that we have to question whether the potential yield will be worth the cost, or whether our search could be better directed towards ways of reducing our consumption and thereby curbing the demand for new resources. Infinite Atmosphere, Infinite Earth When we go outside and look up we see infinite sky above us. It is natural to assume therefore that the atmosphere is infinitely big and can absorb whatever we emit into it. We have overlooked the fact that
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the atmosphere is of finite volume, and that it is in fact just a thin skin that envelops the earth. What we emit into the atmosphere really does have an effect—especially with the scale of emissions from a growing and industrialising society. The same principle applies to our oceans, where the absorption of atmospheric carbon dioxide is increasing ocean acidity, which in turn affects the lower ends of marine ecosystems. Run-off of agricultural nutrients and fertilisers into the oceans is creating ‘dead zones’ in which only algae can survive. Heavy metals and other industrial pollutants don’t simply disappear into the depths, but are taken up by life forms at the lower ends of the food chain and then gradually concentrated in the bodies of each successive step up the food chain—until they are finally returned to us in the seafood we consume. Our society has largely been able to evade and ignore its effects on the living Earth that sustains us, by outsourcing our polluting industries to unseen places and by harvesting food and other essential resources from the territories of foreign human and animal populations. But today there are simply so many of us that our collective impact can no longer be ignored.
A Future Vision Given the converging crises that confront us, it is tempting to maintain an attitude of denial. On the other hand, when one extrapolates these crises to their possible conclusions, it is easy to enter a state of despair. Between the denial and despair, however, there is a wide space that I believe we need to fill with optimistic action. Some of the actions we might take to avoid or adapt to some of the consequences of climate change and peak oil, and hopefully to thrive in a carbon-constrained world, are set out below. The Power of Groups There is tremendous power in groups, awaiting the right catalyst for action. We are all familiar with the group efforts that mobilise to respond to crises such as wars or natural disasters. When we act in a group, we can overcome our individual inhibitions and act with urgency and collective interest. I believe that many viable solutions to climate change and peak oil will be resolved by acting as groups.
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In the first half of 2008, I created the Adelaide Buyers’ Group to harness group power to increase the number of solar panels on the roofs of Adelaide. The buyers’ group simply aimed to attract sufficient purchasers to obtain sizeable discounts from interested suppliers. Using the group buying scheme, grid-connected solar PV systems, which would normally retail for $5000, were now available for around $2000 (after rebates and Renewable Energy Certificates were factored in). The interest from prospective buyers spread and grew in a classic viral-marketing fashion, whereby people would tell their family, friends and colleagues, who in turn told their family, friends and colleagues. With relatively modest effort, 65 households ordered systems in Solar PV Round 1 and 110 households ordered systems in Solar PV Round 2. In Solar Hot Water Round 1 we expect orders from 50 households. Both retailers and consumers can benefit from this approach. Retailers benefit from significant sales volumes with greatly reduced overheads (and therefore costs) for both sales and marketing. Consumers benefit from prices that are substantially below full retail prices, and therefore from the opportunity to purchase technology that enables a more sustainable way of life sooner than they might otherwise afford. It’s a classic win-win that simply requires communication, negotiation and cooperation. Whereas the Adelaide Buyers’ Group was undertaken on a voluntary and non-profit basis, I believe that a similar approach might be taken on a commercial basis with similar results. ‘Purchase brokers’ could do the work to assemble a group and then to negotiate with prospective retailers, in return for a commission on each sale. Alternatively, retailers might advertise group pricing, which encourages groups to self-assemble and approach the retailer when the group has attracted sufficient numbers. This is an approach that is not yet in widespread use, but has big potential. Sustainable Transport Transport is one of the areas where I see the greatest potential for changes that can reduce emissions and increase resilience against future oil cost increases. It is an area in which car manufacturers and politicians have been complacent for too long.
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First, I see a large uptake in public transport over coming years, as rapid increases in the price of oil hurt personal and family budgets. Without anticipating a large growth in demand, public transport systems will be stretched to (or beyond) the limits of their capacity. So the first requirement I see is much greater investment in public transport, to increase capacity and geographic coverage. Secondly, I foresee the need for a much greater investment in cycling infrastructure. Cycling is still regarded by many as an ‘alternative’ form of transport, but it is actually just a marginalised yet mainstream form of transport. Bikes have been pushed off the roads by motor vehicles (or, worse, are forced to compete with motor vehicles on the roads), and it’s little surprise that potential cyclists are scared off by the perceived and real risks. By being smarter about our approach to cycling infrastructure, we can see clever solutions that allow cyclists to commute safely and at high speed, away from motor-vehicle traffic and without presenting a danger to pedestrians. In Adelaide, for instance, there are wide boulevards that run parallel to most railway lines. These boulevards have relatively little vehicular traffic and are ideal for greater use by cyclists, however the boulevards contain numerous dead ends and they cross busy roads, which impede cycling speed, convenience and safety. With a very modest investment, it is possible to build cycling paths through or around dead ends and to bridge busy roads, thereby creating continuous ‘bicycle highways’ that are appealing enough to get large numbers of people out of their cars and onto bikes. This would have multiple benefits: decreases in vehicle traffic congestion, transport emissions and personal obesity; and increases in transport equity and resilience against oil price increases. It just makes so much sense, but we need to shift out of our abundant-energy thinking to grasp the possibilities. I also foresee the electrification our personal vehicles on a large scale. Electric vehicles just have so much going for them: • • •
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the key enabling technologies (batteries, motors, controllers) already exist today; driving speeds of 80–100 kilometres per hour and ranges of 80–100 kilometres are already possible; electrical energy can be delivered using our existing electricaldistribution infrastructure; Andrew Dickson
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the minimal moving parts in the electric drive train result in a vehicle that has very low maintenance requirements and high reliability; electric cars are much more energy efficient than equivalent cars with internal combustion engines; the electricity can be generated from renewable sources—either purchased through the grid from large wind farms and other large renewable-energy generators, or it can be generated locally using solar PV panels on home garage roofs; and old petrol vehicles can be recycled and converted for a new life as electric vehicles.
Hybrid vehicles have filled the void created by the absence of battery electric vehicles (BEVs), and will continue to be a good solution for commuters who travel large distances, but for many of us living and commuting in cities, BEVs will be more than adequate for the majority of our driving. We now await the arrival of the first mass-produced BEVs to enter the marketplace, hopefully in 2009/2010. While I wish that BEVs would be manufactured locally in Australia, I am pessimistic that this will happen due to our continued preference for locally manufactured, large, family-sized (read ‘heavy and fuel inefficient’) vehicles. By the time we wake up to a rapid market shift to BEVs, our local manufacturers will be struggling to compete against high-volume overseas BEV manufacturers. Circular Rather than Linear Resource Use We still regard most resource use as a linear process: acquire, consume, discard. With water, for instance, we acquire it from a tap, then we consume it (for example, we shower with it), and then we discard (flush it away). This approach is abundance-thinking at its finest, and results in convenience at the price of enormous wastage. It is quite possible to have homes that capture, store and use a significant proportion of their water requirements from their own roof catchments, and that treat and reuse all of their waste water (greywater from showers and laundries and blackwater from kitchens and toilets) onsite. The technology to do this exists today, but anyone who has attempted to implement domestic water treatment and recycling, particularly in urban areas, knows that it is a bureaucratic Assumption Traps and a Future Vision
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nightmare getting the necessary approvals. With mains water costing as little as it does, it is a bold early adopter who would invest the capital for onsite domestic water systems. Once the external costs of water are incorporated into the prices we pay, however, this will become a viable option. Similarly for other resources. Food scraps should be viewed as a resource that can be recycled and reused, rather than being sent to landfill. Composting, worm farms and/or chickens should become a familiar part of our domestic landscape, as they were in our grandparents’ time. Again, once externalities are considered, the economic viability of reducing waste will be realised. We need to go back to where we have come from. Going Back to Where We Have Come From I believe that there are significant opportunities available by readopting the best aspects of life before energy abundance: Growing Food Locally Many of our grandparents’ generation had their own vegetable gardens and fruit trees. We can re-acquire these gardening skills and we can grow some of our own food, whether in our own yards or in community gardens. Arguably Australia’s greatest intellectual export, permaculture, has much to teach us in this regard, and modern technologies such as automated watering systems can take much of the time-intensive labour out of the gardening activities and can make best use of precious water resources. Re-localising While energy abundance allowed us to commute large distances and spread our lives across large geographic distances, we should now begin to re-localise. This simply involves designing and positioning aspects of our lives in a modest geographic area, to minimise the energy and time required for travel. Repairing Rather than Replacing Abundant energy has give us a throw-away mentality, but we can rediscover how to repair everyday items and use practical ingenuity to
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prolong the lives of all of our belongings, which avoids the resource inputs for the manufacture of new replacement goods. Re-apply the Basic Building Design Tenets The fundamental design tenets of passive solar design (orientation, shading, window size and window placement), thermal mass, crossflow ventilation and insulation can be re-applied to the design of our homes and commercial buildings. These tenets are simple if we begin the design process with them in mind, and they will save an enormous amount of energy over the life cycle of the building when we get them right. For those who are not convinced of the self-evident virtues of these design tenets, stricter regulations should require much higher levels of energy and water efficiency as a matter of course. And we should to ban black roofs! Asset Sharing I am intrigued by technology enablers and by the changes they can precipitate. While the internet is an invaluable resource for sharing and finding information, it can also help us communicate and negotiate with each other in new ways. eBay, for instance, has revolutionised auctions by automating much of the negotiation process and by abstracting us from the interpersonal contact, which may be a barrier for many people. I believe that a similar approach to eBay could be used to share cars, lawn mowers and other belongings that are used occasionally rather than continuously. Not only would the technology facilitate the communication and negotiation process, but participants would be able to assess the trustworthiness of other participants by viewing their borrowing history. If someone didn’t return something on time or in good condition in the past, we can read about it in an online review and approach that person cautiously. If someone has a faultless track record, we can rest assured that our belongings are in safe hands. This approach can be extended for sharing or swapping excess fruit and vegetables, excess clothes, and all manner of ‘stuff’. In this way, fewer goods will end up being discarded and more will be recycled, and the utility of things will be maximised.
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We can further extend this approach by sharing our time, our skills, spare seats in our car on our daily commute, and so on. All we need for these things to happen easily is communication and negotiation, and there is technology that makes this relatively easy. Selective Big-Stick Government We have become accustomed to ‘small’ governments that give us substantial personal and corporate freedom. Solutions to many of our problems are however beyond the reach of even well-meaning households and individuals, and are not attractive to businesses that perceive that the costs will outweigh the direct financial benefits. It may now be in our best interests if our governments wield a bigger stick on issues that we cannot solve individually, such as emissions targets, housing energy-efficiency standards, motor-vehicle fuel-efficiency standards, and the management of regional water resources. We have begun to see greater stick-wielding over the last few years, particularly in relation to water and health issues, but I believe that this needs to go broader and deeper to address issues that have been largely avoided for too long. Our Federal government must also vigorously pursue global agreement on emissions-reduction targets. While there is global consensus on the need to reduce emissions, we are still stuck with difficult questions: • • • •
How deeply should we reduce emissions? How quickly should we reduce emissions? Which countries/industries should start reducing their emissions first? Which countries/businesses/individuals should pay for the emissions reductions?
Our short-term economic interests suggest that we should do nothing because it is all too expensive, yet our long-term economic interests suggest that it is too expensive not to take extensive action. Perhaps we should do something, and then perhaps do more. What we really need is for our governments to save us from ourselves.
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Conclusion The future that I see is one of enormous challenges from declining energy abundance and from the environmental consequences of our way of living. Some of my peers tend towards a bunker mentality, in which everyone must fend for themselves, but I am inclined more towards an optimistic future in which we can mobilise together to adapt to the changes ahead and to create a positive shared future. Al Gore describes this succinctly with an African proverb: If you need to go quickly, go alone. If you need to go far, go together. We need to go far, quickly!
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Transport Opportunities Towards a Resilient City Professor Peter Newman
The Problem Oil vulnerability has become a major focus of the world’s cities in the early part of the twenty-first century. This is fundamentally because the world is peaking in oil production, as many pundits have been predicting for the past two or three decades. Added to this is the climate-change agenda which suggests that oil needs to be phased out anyway. Reducing oil use is thus a political necessity for many reasons. The waning of petroleum resources and the global climate-change imperatives require all cities to act on their transport systems; if they don’t, their citizenry will not be impressed at the inevitable increase in prices. The price of oil went to US$140 a barrel in 2008 leading to the collapse of subprime mortgages in highly cardependent areas; then as the world economy went into a tailspin, the price collapsed. Now cities are uncertain how to build as the price may rise suddenly again or stay so low that alternatives to oil become destabilised. Such volatility has been predicted as part of the phenomenon around the oil peak.1 However even if the fuel price was not driving this issue we should be doing it anyway for the following reasons:
Reducing Oil Use Will Reduce Impacts on the Environment Oil use is responsible for approximately one-third of greenhouse gases. Transport is seen as the most worrying part of the climatechange agenda as it continues to grow during a period when more renewable or efficiency options are available. Reducing Oil Use Will Reduce Smog Emissions Improvements in urban air quality from technological advances are being washed out by the growing use of vehicles in the thirty-nine different air-quality districts in the United States that are over the required standards (this is 40 per cent of the United States). Developing cities desperately need to lower air emissions as they are often well above World Health Organization (WHO) recommended health limits. Reducing Car Dependence Will Improve Human Health, Safety and Equity The inequities of heavily car-dependent cities for the elderly, the young, and the poor, will be reduced; the health impacts of car dependence such as poor air quality, obesity due to lack of activity, and depression will be reduced; the social issues such as noise, neighbourhood severance, road rage and loss of public safety will be reduced; the economic costs from loss of productive agricultural land to sprawl and bitumen, the costs of accidents, pollution and congestion, all will be reduced. Reducing Our Dependence on Petroleum Fuels Will Make Us Less Economically Vulnerable The next agenda for the global economy, sometimes called the Sixth Wave is about sustainability, responding with technology and services for a new and cleverer kind of resource use. Cities will compete within this economic framework and those cities that get in first will likely do best. But the same economic competition is facing households depending on which city they live in and where they live in those cities. In US cities the proportion of household expenditure on transportation increased from 10 per cent in the 1960s to 19 per cent in 2005, before the 2006 oil price increases (which only reduced the
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percentage to 18 per cent), with very car-dependent cities like Houston and Detroit having even higher percentages. A more detailed study by the Centre for Housing Policy shows working families with household incomes between $20 000 and $50 000 spend almost 30 per cent on transportation. In Atlanta within this income range the percentage is 32 and for families who have found cheap housing on the fringe, it can be over 40 per cent of their income. In Australia, surveys show that 40 per cent of household income goes to transportation in some urban fringe areas. Almost all of this is for car travel. Households on the fringes of car-dependent cities are more vulnerable as the cost of transport escalates. Cities, and parts of cities, are now economically vulnerable to oil depending on the extent of their car dependence. Reducing Dependence on Foreign Oil is Likely to Result in More Resilient, Peaceful Cities Cities that are able to successfully reduce their dependence on imported oil, especially from politically sensitive areas, will have greater energy security. Terrorism and war have many causes but one deep and underlying issue is the need by high oil-consuming cities to secure access to oil in foreign areas, whether they be friendly or not. As oil becomes more and more valuable the security of supply will become a more and more central part of geopolitics. Fear can drive us to make security decisions that are not going to help create resilient cities. Thus, underneath all these arguments is the fact that reducing our oil dependence could result in less war. Most Importantly, Resilient Cities Will Be Better Places to Live The many benefits of a resilient city include greater overall physical and emotional health; ease of movement from higher density, mixeduse communities that are walkable and have accessible transit options; better food that is produced locally and is therefore fresher; more energy-efficient, affordable, and healthy indoor environments; access to natural environments; and more awareness of the local urban area and its bioregion enabling us to have a greater sense of place and identity. Some of these factors are challenging to quantify but are nevertheless real factors.
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The Opportunity The response to these challenges can often be one of panic—that it will have a severe impact on our economy. However it is also possible to see that this is a real opportunity and that the ability of cities to compete effectively in reducing oil will be a major part of their new economies. The next phase of innovation in our cities is seen by some to be based around sustainability innovations as set out by Hargraves and Smith in Figure 1. It is worth noting that these innovation cycles usually grow out of a period of economic downturn, such as the coal to oil transition that occurred in the 1930s, and we can expect something painful when the next transition occurs from oil to renewables and smart cities.
Figure 1: Sustainability innovations since 1785. Source: Karlson Hargroves and Michael H Smith, The Natural Advantage of Nations: Business Opportunities, Innovation and Governance in the 21st Century, The Natural Edge Project, Earthscan, London, 2005.
Thus radical resource productivity and renewable energy can be seen to be linked to the digital networks of the previous innovation phase to produce a whole new set of economic opportunities. These opportunities will make cities and their regions overcome their oil
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addiction and move towards a much greater degree of resilience. The question from this perspective then becomes ‘What are these opportunities and how can we best respond to them?’ This chapter will present five areas where transport opportunities appear to be presenting themselves that could help make resilient cities and regions. 1 2 3 4 5
New generation electric transit systems and their associated TOD, POD and GOD structures. Renewable energy-based electric vehicles linked through Smart Grids. Natural gas and biofuels in freight and regional transport. Telepresence, high-speed rail and airships. Indigenous settlements going diesel-free.
New Generation Electric Transit Systems and Their Associated TOD, POD and GOD Structures Cities need to have a combination of transportation and land-use options that are favourable for green modes, and offer a time saving when compared to car travel. This means transit needs to be faster than traffic down each major corridor. Those cities where transit is relatively fast are those with a reasonable level of support for it. The reason is simple—they can save time. With fast rail systems, the best European and Asian cities with the highest ratio of transit-to-traffic speeds have achieved a transit option that is faster than the car down the main city corridor. Rail systems are faster in every city in our 84-city sample by 10 to 20 kilometres per hour over bus systems, as buses rarely average over 20 to 25 kilometres per hour. Busways with a designated lane can be quicker than traffic in car-saturated cities, but in lower density cardependent cities it is important to use the extra speed of rail to establish an advantage over cars in traffic. This is one of the key reasons why railways are being built in over a hundred US cities.2 Rail has a density-inducing effect around stations, which can help to provide the focused centres so critical to overcoming car dependence. Thus transformative change of the kind that is needed to rebuild car-dependent cities comes from new electric rail systems as they provide a faster option than cars and can help build transitoriented centres.
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How much is it possible to change our cities? It is possible to imagine an exponential decline in car use in our cities that could lead to 50 per cent less passenger kilometres driven in cars. The key mechanism is a quantitative leap in the quality of public transport while fuel prices continue to climb, accompanied by an associated change in land-use patterns. Figure 2 shows the relationship between car-passenger kilometres and public transport–passenger kilometres from the Curtin University Sustainability Policy Institute (CUSP) Global Cities Database. The most important thing about this relationship is that as the use of public transport increases linearly the car-passenger kilometres decrease exponentially. This is due to a phenomenon called Transit Leverage whereby 1 passenger kilometre of transit use replaces between 3 and 7 passenger kilometres in a car due to more direct travel (especially in trains), trip chaining (doing various other things like shopping or service visits associated with a commute), giving up one car in a household (a common occurrence that reduces many solo trips) and eventually changes in where people live as they prefer to live or work nearer transit.3
Figure 2: shows the relationship between car-passenger kilometres and public transport–passenger kilometres from the CUSP Global Cities Database.
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The data on private transport use and public transport use in selected Australian cities for 1996 is given in Figure 3 (passenger kilometres per capita in each case). City
Private transport use (passenger kilometres per person)
Public transport use (passenger kilometres per person)
Percentage of public transport as a share of total transport
Sydney
10506
1509
12.6%
Melbourne
11918
994
7.7%
Brisbane
12487
720
5.5%
Perth
13546
642
4.5%
Figure 3: Car and public transport use per capita in four Australian cities, 1996
These values in Figure 2 show Australian cities are somewhat down the curve from the very high US cities, which have almost no transit (some around the 100 to 200 passenger kilometres per person) and very high private transport use of over 15 000 passenger kilometres per person. The data show that the highest Australian city Sydney had 12.6 per cent of its total motorised passenger kilometres on transit and that the lowest was Perth with 4.5 per cent (this was before the remarkable increase in patronage associated with Perth’s rail revival). If Sydney doubled its transit use to 3018 passenger kilometres per person, from the trend line of Figure 2, it would have a per capita private transport use of 4088 passenger kilometres per capita which is a 61 per cent reduction in car-passenger kilometres per person over the 1996 figure. If Perth was able to continue the rapid growth in transit patronage and triple its 1996 use to around 2000 passenger kilometres per person then it would reduce its private transport use per capita to 6000 car-passenger kilometres per capita, which is a reduction of 56 per cent over the 1996 level. Similar calculations can be done for the other Australian cities. Indeed it is feasible that each city could set a target of increases in passenger kilometres per capita for public transport in order to achieve certain target reductions in 104
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car use as part of their commitment to reaching the national goal of 80 per cent reduction in greenhouse gases by 2050. These remarkable reductions suddenly become imaginable. But are they real? Could it happen? The driving force would need to be a combination of push and pull. The push would come from fuel prices that rise inevitably as supply of oil declines and other alternative fuels just cannot fill the gaping hole in supply. In the US, there was a reduction in Vehicle Kilometres Travelled (VKT) of 4.3 per cent and a substantial rise in transit patronage over 2008 during the rise in fuel though this followed a slightly smaller fall in the year before the price rise and indeed a plateau since 2004 as transit grew faster than ever4. This trend cannot continue unless there is a simultaneous pull from the provision of better transit infrastructure. Already capacity limits have been reached across Australian cities in their public transport, so for a start substantial increases in trains, trams and buses are needed to fill the rapid growth in transit. There will also need to be new lines and new technology like metros and light rail to increase the capacity and speed of transit to make it attractive to use. At the same time the cities will need to develop rapidly around transit stations. This can be a significant source of funding for the required rail infrastructure through ‘Value Transfer PPPs’, as in the very successful Chatswood Transport Interchange PPP which has created a new railway station and bus interchange along with a retail and residential complex that makes a small city around and over the station.5 It can be the main mechanism for replacing the development of car-dependent suburbs which are already beginning to die as the price of fuel climbs. Significant new local transit options linking across the heavy rail corridors—especially with light-rail systems— will also be needed. How realistic is it to assume public transport can increase as described, and what are the capacity implications of such an assumption for our public transport systems? Figure 4 below shows the medium population projections for the five largest Australian cities to 2051. As can be seen, these reveal the following: •
The five largest cities are expected to grow by around 20 per cent between 2004 and 2021, and by 45 per cent by 2051. Transport Opportunities: Towards a Resilient City
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• •
They will increase their share of Australia’s population slightly from 61 per cent to 63 per cent over that time. Although all cities will grow, Brisbane is expected to grow the fastest (almost 90 per cent growth by 2051) and Adelaide the slowest. Growth
Growth
City
2004
2021
2051
2004–2021 2004–2051
Sydney
4225
4871
5608
15%
33%
Melbourne
3593
4252
5041
18%
40%
Brisbane
1778
2404
3355
35%
89%
Perth
1455
1875
2454
29%
69%
Adelaide
1123
1201
1203
7%
7%
Rest of Aust
7917
9268
10509
17%
33%
Australia
20091
23871
28170
19%
40%
Five City SubTotal
12174
14603
17661
20%
45%
% in Five Largest Cities
61%
61%
63%
Source: Australian Bureau of Statistics 32220.0: Population Projections 2004–2101.
Figure 4: Medium Population Projections for Australia, 2004–2051 (‘000s)
Figure 5 below shows the implications in terms of per capita passenger- kilometres in those cities ranging from a doubling by 2051 for Sydney to a tripling for the small cities (Brisbane, Adelaide and Perth) as suggested in the analysis above. Thus they suggest per capita public transport use in Melbourne in 2021 would be slightly above City
1996
2004
2021
2051
Sydney
1509
1500
2100
3000
Melbourne
994
990
1600
2500
Brisbane
720
800
1300
2200
Perth
642
700
1200
2000
Adelaide
500
500
800
1500
Figure 5: Assumed per-capita public transport use in Major Australian Cities (passenger kilometres per year)
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that achieved in Sydney in 2004, while Perth and Adelaide’s use in 2051 would equal that of Sydney currently. The total public transport travel task implied by these predictions is shown in Figure 6, combining the derived per capita growth figures with the predicted population increases. This shows that across the five largest cities total patronage would need to be lifted by 80 per cent by 2021, and more than doubled by 2051. Estimated passenger kilometres (billion) City
Growth
Growth
2004
2021
2051
2004–2021
2004–2051
Sydney
6.3
10.2
16.8
61%
165%
Melbourne
3.6
6.8
12.6
91%
254%
Brisbane
1.4
3.1
7.4
120%
419%
Perth
1.0
2.3
4.9
121%
382%
Adelaide
0.6
1.0
1.8
71%
221%
12.9
23.4
43.5
81%
237%
Total
Figure 6: Implications for overall public transport use
However the increase in patronage in peak periods would not need to be as large as in off-peak periods, given the much lower share achieved for non-work or education trips (such as social/recreation, shopping and business trips) which are largely made in off-peak periods. This is shown in Figure 7 below to illustrate the task in terms of augmenting public transport capacity at peak periods in each of the cities to achieve the above increase in public transport use. Growth 2004–2021 City
Peak
Growth 2004–2051
Off-Peak
Peak
Off-Peak
Sydney
50%
70%
120%
200%
Melbourne
70%
110%
200%
300%
Brisbane
100%
140%
300%
500%
Perth
100%
140%
280%
480%
Adelaide
50%
90%
150%
300%
Total
65%
95%
160%
320%
Figure 7: Estimated increase in peak and off-peak capacity
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Hence to achieve major reductions in car use it would be necessary to increase capacity in Sydney by around 50 per cent by 2021, and by 120 per cent by 2051. For Brisbane the increases are more like a doubling in capacity by 2021 and a quadrupling by 2051. These are not difficult to imagine as they represent growth rates of around 2 per cent per year. With such growth the transformation of Australian cities to achieve significant reductions in car use can then happen. The biggest challenge in an age of radical resource-efficiency requirements will be finding a way to build fast rail systems for the scattered car-dependent cities. How can a fast transit service be built back into these areas? The solution may well be provided by Perth and Portland which have both built fast rail systems down freeways. Freeways are public facilities that may well be in decline as indicated by the recent travel data in US cities and which is likely to get much worse in the future as car traffic faces the double whammy of increasing fuel prices due to peak oil, and carbon taxes due to climate change. To build fast electric rail down the middle of these roads is easier than anywhere else as the right of way is there and engineering in terms of gradients and bridges is compatible. They are not ideal in terms of ability to build Transit-Oriented Developments (TOD) but it can still be done using high-rise buildings as sound walls. Linkages from buses, electric bikes, and park and ride are all easily provided so that local travel to the system is short and convenient. The key is the speed of the transit system and in Perth the new Southern Railway has a maximum speed of 130 kilometres per hour (80 miles per hour) and an average speed of 90 kilometres per hour (55 miles per hour) which is at least 30 per cent faster than traffic. The result is dramatic increases in patronage far beyond the expectations of planners who see such suburbs as too low in density to deserve a rail system. The Southern Railway reached 55 000 passengers a day in its first year of operation whereas the previous bus system down the corridor carried just 14 000 a day. There is little else that can compete with this kind of option for creating a future in the car-dependent suburbs of many cities. The TOD has become a major technique for reducing automobile dependence and hence tackling peak oil. For the full agenda of
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sustainability and peak oil to be addressed, TODs need to also be Pedestrian-Oriented Developments (PODs) and Green-Oriented Developments (GODs). The facilitation of TODs has been recognised by all Australian cities and many American cities in their metropolitan strategies, which have developed policies to reduce car dependence through centres along corridors of quality transit. The major need for TODs is not in the inner areas as these have many from previous eras of transit building. However the newer outlying suburbs, built in the past four or five decades, are heavily car dependent with high fuel consumption and almost no TOD options available. There are real equity issues here as the poor increasingly are trapped on the fringe with high expenditures on transport. A 2008 study by the Center for TransitOriented Development shows that people in TODs drive 50 per cent less than those in conventional suburbs. In both Australia and the United States, homes that are located in TODs are holding their value the best or appreciated the fastest under the pressure of rising fuel prices. The Urban Land Institute 2008 report, Emerging Trends in Real Estate, suggested that TODs would appreciate fastest in up-markets and hold value better in down-markets.6 Thus TODs are an essential policy for responding to peak oil, especially when they incorporate affordable housing. The economics of this approach have been assessed by the Center for TransitOriented Development and the NGO Reconnecting America. In a detailed survey across several states they assessed that the market for people wanting to live within half a mile of a TOD was 14.6-million households. This is more than double the number who currently live in TODs. The market is based on the fact that those living in TODs now (who were found to be smaller households, the same age and the same income on average as those not in a TOD) save some 20 per cent of their household income by not having to own so many cars— those in TODs owned 0.9 cars per household compared to 1.6 outside. This freed up on average $4000 to $5000 per year, and in Australia a similar calculation showed this would save some $750 000 in superannuation over a lifetime. Most importantly, this extra income is spent locally on urban services that mean the TOD approach is a local economic development mechanism.
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TODs must also be PODs, that is pedestrian-oriented development, or they lose their key quality as a car-free environment where businesses and households are attracted. This is not automatic but requires the close attention of urban designers. Jan Gehl’s transformations of central areas such as Copenhagen and Melbourne are showing the principles of how to improve TOD spaces so they are more walkable, economically viable, socially attractive, and environmentally significant. It will be important for those green developers wanting to claim credibility that scattered urban developments, no matter how green in their buildings and renewable infrastructure, will be seen as failures in a post–peak oil world unless they are building pedestrian-friendly TODs. At the same time TODs that have been well designed as PODs will also need to be GODs—green-oriented developments. TODs will need to ensure that they have full solar orientation, are renewably powered with Smart Grids, have water-sensitive design, use recycled and low-impact materials, and innovations like green roofs. Perhaps the best example of a TOD-POD-GOD is the redevelopment of Kogarah Town Square in Sydney. This inner-city development is built upon a large city council car park adjacent to the main train station where there was a collection of poorly performing businesses adjacent. The site is now a thriving mixed-use development consisting of 194 residences, 50 000 square feet of office and retail space, and 35 000 square feet of community space including a public library and town square. The buildings are orientated for maximum use of the sun with solar shelves on each window (enabling shade in summer and deeper penetration of light into each room), photovoltaic (PV) collectors are on the roofs, all rainwater is collected in an underground tank to be reused in toilet flushing and irrigation of the gardens, recycled and low-impact materials were used in construction, and all residents, workers, and visitors to the site have a short walk to the train station (hence reduced parking requirements enabled better and more productive use of the site). Compared to a conventional development, the Kogarah Town Square saves 42 per cent of the water and 385 tonnes of greenhouse gas—this does not include transport oil savings that are hard to estimate but are likely to be even more substantial.
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Renewable Energy-Based Electric Vehicles Linked Through Smart Grids Even if we manage to reduce car use by 50 per cent as suggested above, by a rather herculean effort, we still have to reduce the oil and carbon in the other 50 per cent of vehicles being used. The question should therefore be asked: What is the next best transport technology for motor vehicles? The growing consensus seems to be plug-in hybrid electric vehicles (PHEV). Plug-in electric vehicles are now viable alternatives due to the new batteries such as Lithium Ion, and with hybrid engines for extra flexibility they are likely to be attractive to the market. The key issue here is that plug-in electric vehicles not only reduce oil vulnerability but they are becoming a critical component in how renewable energy will become an important part of a city’s electricity grid. The PHEVs will do this by enabling renewables to have a storage function. After electric vehicles are recharged at night they can be a part of the peak power provision next day when they are not being used but are plugged in. Peak power is the expensive part of an electricity system and suddenly renewables are offering the best and most reliable option. Hence the Resilient City of the future is likely to have a significant integration between renewables and electric vehicles through a Smart Grid. Thus electric buses, electric scooters and gophers, and electric cars have an important role in the future Resilient City—both in helping to make its buildings renewably powered and in removing the need for oil in transport. Electric rail can also be powered from the sun in this way, either through the grid powering the overhead wires or in the form of new light rail (with these new Li-Ion batteries) which could be built down highways into new suburbs without requiring overhead wires. Signs that this transition to electric transport is underway are appearing in demonstration projects such as Google’s 1.6 MW solar campus in California (with 100 PHEVs) and by the fact that oil companies are acquiring electric utilities.7 What sort of impact could there be? According to one study the integration of hybrid cars with the electric power grid could reduce gasoline consumption by 85-billion gallons per year. That’s equal to 27 per cent reduction in total US greenhouse gases; 52 per cent reduction in oil imports; and $270-billion not spent on gasoline.8
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The real test of a Resilient City will be how it can simultaneously be reducing its global greenhouse and oil impact through these new technologies, while reducing the need to travel by car due to the policies outlined in the first strategy on transit and TODs. Natural Gas and Biofuels in Freight and Regional Transport. What do you do with freight transport and regional transport outside of cities where electric grids are not so easily used with vehicles? There will almost certainly be a reduction in the amount of freight moving around as fuel prices eat into the transport economics of consumption. Containers will be reduced as their fuel costs move from being 10 to 15 per cent to over 50 per cent. Food miles will start to mean something to food prices when the cost of fuel triples. But trucks and trains and regional transport will still go on. The next stage for larger vehicles and for regional transport would appear to be to switch to greater use of natural gas and biofuels. Trucks, trains and fishing boats can use compressed natural gas (CNG) or liquefied natural gas (LNG) in their diesel engines (with pay-off times of just a few years due to high diesel costs). Cars can be switched over as well (particularly if the manufacturer makes them standard as occurred in Sweden when the government committed to natural-gas cars for their vehicle fleet). The attraction is that natural gas is already in place in terms of infrastructure although actual filling stations are not commonplace. The conversion to natural gas is an obvious step in places like Australia where there is a good supply of natural gas available. However in Europe and in the United States this is not the case. Europe is going to faraway places in the east, such as Russia, to get their gas and already some signs of an OPEC-like protection of the resource are developing. In the United States natural gas has already peaked and officials are now looking to import it using LNG tankers— starting an overseas dependence similar to oil. Global natural-gas production has had similar estimates on its peak as oil production and they range from 2010 to 2030 with a little less certainty than oil. The peak in discoveries occurred in the late 1960s to early 1970s so the same pattern as oil seems to be evident. It is not surprising that oil and natural-gas patterns are parallel as they have similar geological origins in marine sediment (unlike coal which
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comes from ancient forests). In addition, oil and natural-gas prices are closely linked so as oil goes up in price the same occurs for natural gas. Natural gas can only be a small part of the transitional arrangements for oil; it cannot be seen as the long-term replacement as it is also peaking. Moreover its use will need to be eventually phased out as part of our response to climate change. The benefit of the transition to natural gas is that it enables the long-term transition to hydrogen to be facilitated. Biofuels have promised a lot but since they began being delivered they have become rather tarnished due to their impact on food prices when used to convert fuel from grain, and when some estimates suggested they may be worse than oil when it comes to climate change. However they still have a potentially significant role in some areas where there is surplus sugar for example, and eventually when the technology improves to make them from cellulose materials (agricultural and forestry waste) and from blue-green algae. It is likely that biofuels will be used as a do-it-yourself fuel on farms. Thus biofuels may have a role in agricultural regions as a fuel to assist farmers in their production, but as a widespread fuel for cities it is not an option that can be yet taken seriously. Telepresence, High-Speed Rail and Airships Transport to meet people by long-distance or even short-distance trips within cities may not be needed once the use of broadbandbased telepresence begins to make high-quality imaging feasible on a large scale. There will always be a need to meet face-to-face in creative meetings in cities, but for many routine meetings the role of computer-based meetings will rapidly take off. Aircraft are not going to cope easily with the rapid rise in fuel. At the height of the 2008 fuel crisis the head of Virgin Airways said ‘No airline can make money when fuel rises to 35 per cent of the costs of running an airline’. Gilbert and Perl suggest a few ways that air travel will adapt, but mostly they see little of potential other than regional high-speed rail and a return to ship travel.9 Perhaps the technology that could make a comeback is airships. These are able to fly at low levels at speeds of 150 to 200 kilometres per hour, and carry large loads with one tenth of the fuel of aircraft technology. They are already being used to carry large mining loads
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to remote areas and to take groups of 200 or so on ecotourism ventures similar to a cruise ship. Indigenous Settlements Going Diesel-Free Remote settlements in Australia are under the spotlight due to serious health and social problems. The obvious lack of governance to enable decent services to these areas is likely to be overcome through federal and state commitments. But they must also begin to show how they can become diesel-free as these settlements are highly vulnerable to price rises. Renewable power can be used in these settlements but not much is there yet for transport. These settlements need to be provided with upgraded road access to enable weekly services by ‘bush bus’ that can enable them to have reasonable access to regional towns. Fewer vehicles are likely to be the main response, however, to the global fuel crisis on these areas. It is important to see that the resilience of all settlement types will be challenged by the peak oil/climate change transition. Indigenous settlements, like all settlements, will need to forge ways of reducing their oil dependence while improving the quality of life for their citizens.
Conclusions There are not many guidelines to the future of our cities and regions that take account of what could happen to transport in response to climate change and peak oil. It is understandable therefore why some people get very upset about the possibilities of collapse. According to Lankshear and Cameron ‘Peak oil has already become a magnet for post-apocalyptic survivalists who are convinced that western society is on the brink of collapse, and have stocked up tinned food and ammunition for that coming day’.10 The alternatives all require substantial commitment to change in both how we live and the technologies we use in our cities and regions. The need to begin the changes is now as they will take decades to get in place, and the time to respond to peak oil and climate change is of the same order, probably less. But at least by imagining some of the changes as suggested above it is possible to see how we can get started on the road to more resilience and sustainability in our settlement transport systems.
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Notes 1
See a summary of the peak-oil issue in P Newman, ‘Beyond Peak Oil: Will Our Cities Collapse?’, Journal of Urban Technology, vol. 14, no. 2, 2007, pp. 15–30 and in P Newman, T Beatley and H Boyer, Resilient Cities: Responding to Peak Oil and Climate Change, Island Press, Washington DC, USA, 2009. 2 Data are from J Kenworthy and F Laube, The Millennium Cities Database for Sustainable Transport, UITP, Brussels, Belgium, 2001, which was a study of 100 cities (sixteen were incomplete) and twenty-seven parameters using highly controlled processes to ensure comparability of data. See also J Kenworthyet al, An International Sourcebook of Automobile Dependence in Cities, 1960–1990, University Press of Colorado, Boulder, USA, 1999. 3 Peter Newman and Jeffrey Kenworthy, Sustainability & Cities: Overcoming Automobile Dependence, Island Press, Washington DC, USA, 1999. 4 Robert Puentes and Adie Tomer, The Road Less Travelled: An Analysis of Vehicle Miles Travelled Trends in the US, Metropolitan Infrastructure Initiative, Number 4, Brookings Institution, Washington DC, USA, 2008. 5 Blake Dawson, ‘The New World of Value Transfer PPPs’, Infrastructure: Policy, Finance and Investment, May, 2008, pp. 12–13. 6 Urban Land Institute, Emerging Trends in Real Estate, 2008, www.uli.org/ AM/Template.cfm?Section=News&CONTENTID=107907&TEMPLATE=/ CM/ContentDisplay.cfm 7 Google, www.google.org/recharge/; Energy Smart, http://energysmart. wordpress.com/2007/06/22/rollerblading-to-a-phev-future/ 8 Michael Kintner-Meyer, Kevin Schneider and Robert Pratt, Impacts Assessment of Plug-In Hybrid Vehicles on Electric Utilities and Regional U.S. Power Grids, Part 1: Technical Analysis, Pacific Northwest National Laboratory, 2007, www.ferc.gov/about/com-mem/wellinghoff/5-24-07technical-analy-wellinghoff.pdf 9 Richard Gilbert and Anthony Perl, Transport Revolutions: Making the Movement of People and Freight Work for the 21st Century, Earthscan/ James & James, London, England, 2008. 10 David Lankshear and Neil Cameron, ‘Peak Oil: A Christian Response’, Zadok Perspectives, Spring 2005, pp. 7–11.
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Part 3 Business Opportunities
B
usiness is the driver of economic activity. With the full engagement of businesses of all sizes and in all sectors in delivering the solu-
tions required for climate change, success will come most easily. There are clear opportunities in some of the emerging sectors. What is not so often discussed is that are opportunities for all businesses to change and benefit from the transition to a low-carbon economy. All of these opportunities are discussed in this section. In the McKinsey Quarterly journal published in October 2008, an article written by Marcel Brinkman, Nick Hoffman and Jeremy Oppenheim considers how these opportunities have the potential to create value for companies that deliver the solutions. As global warming spawns new regulations, technological remedies, and shifts in consumer behaviour, its effect on the valuations of many sectors and companies is likely to be profound. We assessed company cash flows in each industry in three scenarios: a business-as-usual scenario, a scenario involving the greatest degree of change executives can now imagine (the executive scenario), and a scenario that many scientists believe would be required to stave off a high likelihood of catastrophic climate change–related events (the experts’ scenario). As compared with the business-as-usual scenario, the valuation of a representative building-materials company
in the developed world increases by 35 percent in the executive scenario and by 80 percent in the experts’ one. This not only applies to the emerging cleantech sector but also to business in general. This section focuses on both the general opportunities for business, through understanding the strategic drivers and the potential for careful branding, and also the specific opportunities in sectors such as the water industry. Sectors such as this are hugely important for many reasons and present multiple opportunities to not only change their own behaviours but also to enable changes within other industries. The section ends with an optimistic view of businesses ability to innovate and turn the biggest problem into the greatest opportunity. On this basis, there are plenty of opportunities there to be captured.
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9
The Business Case for Going Beyond Carbon Dan Atkins and Nick Palousis
Introduction Evidence of human-induced climate change, coupled with Australia’s policy commitments to tackle this issue and adapt to its effects, have created a situation in which government, society, businesses and individuals are now faced with a rapidly changing environment within which they live and operate. A result of both climate change and the global financial crisis, now more than ever, new and innovative ways of doing business are required to sustain and grow organisations throughout an uncertain future. This changing environment exposes business to a variety of material business risks, as they feel increasing pressure from the market, stakeholders and the wider community to contribute to both national and global efforts to mitigate and adapt to the effects of climate change. The recommendations from the Garnaut Climate Change Review and the Federal Government’s Carbon Pollution Reduction Scheme are examples of the inevitable regulatory burdens that businesses face, further affecting their current way of operating. At the same time, climate change poses some significant business opportunities for companies to achieve or maintain competitive advantage. Done strategically and intelligently, a business response to climate change can enable access to new markets, increase the
efficiency of operations, capitalise on market demand for ‘green’ goods and services, secure the supply chain, and attract and retain staff in a tight labour market. This chapter outlines the business case for going beyond carbon, describing the risks and opportunities of adopting sustainable business practices and improving sustainable performance beyond compliance. Using the four sustainability domains of Environment, Community, People and Economy, displayed in Figure 1, opportunities to gain and maintain competitive advantage through improved sustainability performance are outlined. An approach describing how business can make the most out of the current situation is also addressed, with a focus on implementing a whole-of-company strategy for sustainability.
Forces Acting on Businesses in a Carbon-Constrained Economy Climate change itself is only one aspect of the rapidly emerging, broader sustainability agenda. Successfully addressing the many different, yet interconnected dimensions that contribute to sustainability requires a holistic and whole-of-company approach. This can be achieved by considering the four sustainability domains of the
Figure 1: Sustainability domains.
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Environment, Community, People and Economy, and the resulting implications to businesses. Sustainability Domains Explained Environment Global population growth and increasing industrial activity since the time of the industrial revolution, especially during the last fifty years, have had a profound effect on the environment. The most visible effects of these human activities on the environment have been the depletion of natural resources, pollution of our oceans, rivers and lakes, declining air quality, reduction of global forest covers, and reductions in biodiversity, among many others. However, in recent times and especially in Australia, climate change has taken centre stage, given our higher risk exposure to its impending effects. Australia can expect to feel the environmental impacts of climate change earlier and more severely than other developed nations, given its already dry climate and delicate coastline.1 Climate change poses several implications that will directly or indirectly affect the way businesses operate, delivering environmental constraints that require adaptation and mitigation actions for their continued operation. Examples of climate-change effects on business are diverse and permeate through all layers outlined in Figure 1, affecting the economy in particular. For example, rising temperatures together with reduced rainfall and increased evaporation reduces crop yield and overall food production, increasing prices and impacting profitability. These same weather conditions also increase the likelihood of fire by extending the duration of the bushfire season and creating an environment increasingly susceptible to such events. The devastating and detrimental effects of which have been highlighted by the 2009 Victorian bushfires. Water shortages also impact operations, and as the scarcity of water continues throughout the twenty-first century it will become one of many increasingly expensive resources. For instance, Victoria’s proposed desalination plant is expected to double the cost of household water bills.2 Community As the community begins to feel the effects of climate change, such as the increasing cost of many resources, goods and services, people are
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starting to question the proactivity of the business community, expecting them to play a more active role in climate-change mitigation and adaptation. Industries, especially energy- and water-intensive ones, are known to have a major environmental impact. As a result industry has moved more and more into the public eye and companies are scrutinised for their activities and regularly questioned about their environmental and sustainability performance. As consumers become more informed, they demand more action and expect greater transparency from companies in regards to manufacturing processes, supply-chain efficiency, product life cycle and design, and employee satisfaction. Having transparent, audited and credible information and data on sustainability performance will be critical to appease increasingly sceptical customers and stakeholders. A clear example of this is the National Greenhouse Emissions Reporting Scheme (NGERS) that commenced on 1 July 2008. As companies are forced to disclose their emissions, it becomes easy to compare organisations within a particular industry, community or between states, with best-practice performers easily distinguished from poor ones. The increasing number of sustainability reports is also evidence of this trend, and the breadth of coverage is likely to include measuring and reporting of aspects, over and above just greenhouse-gas emissions. Establishing partnerships, consultation and close relationships through engagement with the communities in which companies operate, strengthens their position and local perception. Any investment in building a community’s health and ensuring their wellbeing and sustainability is an investment in their own business. Businesses can no longer be seen or see themselves as external to the community, but need to be considered a part of, or at least connected with, it. People Individuals are increasingly making day-to-day decisions and lifestyle choices that take into account implications on climate change and sustainability. Some of these choices will directly affect company revenue, reputation and mid- to long-term viability in the market. More informed consumers will demand products and services that do not harm the environment and are sourced in a ‘fair’ or sustainable way,
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from companies that treat employees well and have established an overall positive image within the community. Increasingly, employees are demanding a change in attitude by their employers, in regards to types of products and services they sell, clean operations, procurement and especially the benefits and working environment they provide. The direct effect of these demands and the company response will drive staff retention and attraction, employee satisfaction, wellbeing and ultimately productivity. This has been shown in survey results where 15 per cent of jobseekers considered only working for a company with a Corporate Social Responsibility (CSR) program, and 69 per cent thought a CSR program is an important factor when looking for potential employers.3 While staff attraction and retention will always be important for businesses, it is recognised that the global financial crisis is a major issue companies are now focused on dealing with. Attracting new staff may not be a priority in the downturn of 2009, but in order to address the sustainability agenda and succeed in challenging times, companies must shift their focus towards the transfer of skills and internal capability development. Instead of cutting back on the training budget in order to reduce expenditure, efficiencies can be gained by re-training and positioning existing employees, who already understand the business, to focus on the areas that generate the highest sources of value in the short-term. Economy This domain captures the flow-on effects of the three previous domains, and sees them impacting on the bottom line of business. It represents the implications on business operations in the short-term and the threats to their viability in the long-term, if decisions are made that do not capture the opportunities or ameliorate the risks arising from the emerging sustainability drivers and challenges. By signing the Kyoto Protocol in 2007, Australia committed to reducing its emissions, and the key market tool to drive companies to do so is an emissions trading scheme, called the Carbon Pollution Reduction Scheme. It is imperative that businesses learn to operate within this new framework, which is likely to result in higher energy costs. Given the interconnected global economic and financial systems, Australia will be impacted by the effects of climate change both
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in our region and elsewhere in the world. An example of this was in 2005 when Hurricane Katrina hit the Gulf of Mexico, destroying oil rigs and interrupting operations for several weeks, leading to higher fuel prices. The effects of a long drought, as predicted for many parts of the world under a changing climate, or crop disease in a key grainproduction region will result in a rise in global food prices. With the cost of corn rising 21 per cent, rice 74 per cent, soya 87 per cent and wheat 130 per cent between 2005 and 2007, the recent global food crisis is evidence of this.4
The Business Case for Going Beyond Carbon With climate change and the emergence of the sustainability agenda, business is exposed to increasing risks and pressures, that cannot be ignored or avoided, and must be approached with the correct knowledge, preparation and adaptation measures. The approach taken by the Australian Government in launching the Carbon Pollution Reduction Scheme and other initiatives such as Renewable Energy Funds and National Greenhouse and Energy Reporting System (NGERS) in response to climate change, requires rapid adaptation and leaves minimal time for businesses to prepare. However, for those companies that manage to prepare early and adapt well, there are many opportunities that will see them continuing to operate and excel. This represents a chance for re-positioning themselves as leaders in their industries, at the new level of competitiveness— sustainability performance. Business Drivers for Sustainability There are ten key business drivers that companies can use to assess their sustainability performance and identify areas in which they can improve and maximise profit and shareholder value, and mitigate risks. Branding and Market Positioning Despite an economic downturn, consumer values remain unchanged and their demand for demonstrated sustainability leadership from both business and government continues to increase. As they look for ways to reduce their overall expenditure, consumers continue to prioritise products and services that align with their core values.
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According to Andy Baker, Director and Co-Founder of Mobium Group: In general, an individual’s values are deeper than opinions, and slower to change. Mobium’s annual national consumer research study, Living LOHAS2, showed that in late 2008, almost 30 percent of Australians demonstrated moderate to strong values alignment with the concept of sustainability and for these individuals, their values around personal, community and planetary health and wellbeing significantly affect their consumption behaviour. Companies that can demonstrate leadership in sustainability across all areas of their business are able to build positive stakeholder relationships and in turn develop strong and credible brands. A whole-of-company approach that considers all levels and departments of the company is required to achieve this level of credibility. Failure to build a credible brand or the use of greenwashing, (stating false or confusing environmental claims) will have counterproductive effects. A recent example is the ACCC issuing legal proceedings against GM Holden, responsible for supplying and marketing of Saab vehicles in Australia, in response to their false and misleading claims made during the advertising of Saab vehicles.5 Developing credible, sustainable or environmentally-friendly products, and marketing these, helps to build and maintain a strong and reliable brand, increasing revenues, building customer loyalty, community acceptance and employee morale. Further, companies that make a legitimate effort to improve their sustainability and are recognised for doing so are likely to attract and retain the best talent in their industry. Risk Management Climate change is now and will continue to impose several risks on companies throughout the twenty-first century. Some of these have been mentioned in the previous section, but risks can be generally covered by the following categories: •
Operational risks: Extreme weather events can disrupt business operations and damage infrastructure vital to company’s
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•
•
•
•
operations. ‘Industries such as forestry, agriculture and tourism that rely directly on ecosystem services are most exposed to risks linked to declines in biodiversity as a result of climate change.’6 Financial risks: The most obvious example is the introduction of a carbon price and the rising cost of insurance premiums, due to more extreme weather events. Further, access to capital in the future will be influenced by a company’s sustainability as investors increasingly make decisions based on this performance level as well. ‘In the Australasian region managed responsible investment portfolios grew by 380% to $17.1 billion, between 2004 and 2007.’7 Market risk: Consumer awareness of sustainability and climatechange issues is increasing and so too is demand for more sustainable products that factor social equity, environmental concerns and price into their offering. ‘Seventy-nine per cent of consumers would rather buy from companies doing their best to reduce their impact on the environment.’8 Reputational risk: Building a brand takes many years, but hard work can be destroyed quickly if there is no substance to support what it represents. ‘Woolworths have been repeatedly and publicly attacked for stocking toilet and tissue paper products with false “green” claims attached’.9 Regulatory risk: The increasing needs to comply with existing and upcoming environmental regulations, and incorporating the associated costs such as staff training, reporting, monitoring and managing emissions. For example, introduction of NGERS in 2008 and the Government’s Carbon Pollution Reduction Scheme in 2010.
People and Performance It is well known that improving employee wellbeing can often lead to improvements in overall productivity and reduction of absenteeism of up to 15 per cent in some cases.10 There are several ways to increase staff wellbeing, starting with an eco-friendly and flexible work environment that increases staff morale and attitude towards work. In Australia, 50 per cent of graduates chose Westpac over other Australian banks explicitly because of its proactive CSR approach.11
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Consultation with and involvement of staff in a company’s sustainability agenda helps create an environment in which people are more productive and feel appreciated for their efforts. Community Acceptance and Partnerships Engaging in community and stakeholder partnerships delivers value to both the company and the surrounding community and improves an organisation’s ability to operate in its local environment. Companies that build partnerships will increase their reputation, brand recognition, access to talented employees and ensure that these relationships provide mutual benefit among all stakeholder groups in their host communities. An example of a company strengthening its position in the community is Bendigo Bank, with a community banking model that has generated enviable levels of customer trust and satisfaction. A 2008 Bank Satisfaction survey found that 90.3 per cent of its customers were happy and satisfied, and that 96 per cent of customers and shareholders support the current Board and Executive Team of Bendigo Bank.12 Historically, some NGOs have played a questioning role, uncovering inappropriate practices, exposing companies and governments that operated with little consideration for their impact on the community and the environment. As organisations understand their changing role towards the community and the environment, partnering with NGOs is an example of how companies can make sure they are recognised for and are operating in a socially and environmentally sustainable manner. Operational and Resource Efficiency Companies that start taking measures towards going beyond compliance with regulations or are taking a more proactive approach towards climate-change mitigation are realising the financial benefits of implementing these measures. Some of the simplest examples of this involve efforts to reduce energy and water consumption and/or waste production, leading to what can be significant operational cost savings. These results can be enhanced with deeper measures, such as product redesign for higher recyclability and performance, business
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process re-engineering, redesign of manufacturing processes that target energy efficiency, reduced material input and reduced defect rate. The compatibility of increasing operational efficiency and environmental-impact reduction makes this one of the most valuable drivers and generally becomes the starting point for assessing the benefits of applying sustainable business practices within a company. Between 1990–2005 DuPont, a worldwide leader in science and innovation, managed to save US$3-billion through implementation of energy-efficiency activities and is now working on its entire value chain to increase sustainability performance.13 Access to Capital As mentioned, companies will come under increasing scrutiny from investors for their sustainability performance and adaptability to the many risks they are exposed to. Industries with a higher risk exposure to climate-change events (building, construction, tourism, agriculture) and/or regulatory changes (coal-fired power plants and energy-intensive companies) will likely have more difficulty attracting investors, resulting in a higher cost of capital. However, within these industries, those that are better prepared or have incorporated sufficient risk-management mechanisms are more likely to find an adequate financial backing for their operations. Simon Thomas, CEO of Trucost, a UK-based environmental research group, says companies that prove more carbon and energy efficient will come out the winners, and so too the super-funds that are ‘overweight in them’.14 Innovation The thinking and technologies that have lead to the climate situation we face today are unlikely to solve the problems they have generated. With the difficulty and uncertainty of the task at hand a new paradigm shift in thinking is required, transforming the way businesses operate and how we go about our everyday lives. Businesses must uncover innovative ways of undertaking processes and the design of products, they must also ensure they make efforts to reduce the energy consumption and greenhouse-gas emissions associated with their goods and services.
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New Investment Opportunities In the changing business environment, early adopters and innovators will be better positioned for future changes. An example of this is the investment in cleaner technologies and renewable energy sources, where early adapters will become leaders in their respective industries. At the stage when these become mainstream, the early adopters will have acquired experience, further developed the technologies and their applications, and will be able to capitalise on this advantage. GE reported that revenues from its portfolio of energy-efficient and environmentally-advantageous products and services crossed $14-billion in 2007, up more than 15 per cent from 2006; the ecomagination order book surged past $70-billion. ‘Ecomagination is one of the most successful cross-company business initiatives in our recent history,’ said GE Chairman and CEO Jeff Immelt. ‘It is a clear amplifier of our strong reputation for innovation and execution, harnessing the strength of every GE business to maximise returns for GE investors while minimising our own energy use and greenhouse gas emissions.’15 Supply Chain Management Companies collaborating with suppliers along their supply chain can develop significant cost advantages and reduce risks associated with supply and demand fluctuations. Building close relations, sharing knowledge of improvement opportunities and building capacity allows all members of the supply chain to share risks and opportunities. UK food-retailer Tesco recognised the business benefits of working with their supply chain to minimise their impact on the environment, adopting the Nature’s Choice and Wildlife Choice codes to source food only from sustainable farming practices that promote biodiversity. Tesco also supports the Marine Stewardship Council and the sourcing of wood from sustainably managed forests.16 Corporate Governance Effective corporate governance ensures that a company builds trust with a wide range of stakeholders and has the capacity to respond to future regulations and issues.
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Good corporate governance structures encourage companies to create value through entrepreneurism, innovation, development and exploration, and provide accountability and control systems corresponding to the risks involved to the company.17
Conclusion The above business drivers for sustainability highlight the need for businesses to recognise the interconnected nature and multiple dependencies amid the four sustainability domains of Environment, Community, People and Economy. It is therefore fundamental to apply a whole-of-company approach to adapting and operating in the new carbon economy. Isolated activities to mitigate emissions, create new ‘green’ products, minimise waste or reduce water consumption are a good start, but will fall short of a company’s potential when compared to a unified approach.
The Way Forward Given the business case, how can companies then identify their sustainability potential, maximise opportunities and realise the list of benefits outlined for operating beyond carbon? Companies have several choices when deciding on how to tackle the shift to a new carbon economy, which can broadly be grouped into business as usual, keeping pace and setting the pace. The first consists of ignoring the shift that is occurring, in a hope of making it go away. In this case, the only objective is to comply with existing and upcoming regulations, without a self-driven, long-term view of the company (but rather the regulator imposing the long-term view). This is the riskiest approach, as these companies will be hardest hit as the business community moves forward adapting to a new carbon economy. The keeping-pace approach is more reactive and tactical, seeing companies take initiatives to reduce their environmental and social impacts beyond what is required by regulatory measure. The third approach, setting the pace, allows companies to realise their full potential, show leadership, gain competitive advantage over industry peers and maximise profitability through sustainability. Companies who set the pace are looked upon as the leaders and innovators in sustainability and reap the long-term rewards through
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reducing costs, increasing profitability and owning a leadership position.
Notes The authors would like to acknowledge and thank Mathias Witt, Nadya Krienke-Becker and Luke Wynne from the Shaper Group for their assistance and contributions in writing this article. 1 2 3 4 5
6 7
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Ross Garnaut, Garnaut Climate Change Review, Draft Report, 2008. Rick Wallace, ‘Desalination Plant to Double Household Water Bills’, The Australian, 20 June 2007. Seek, Feed Your Mind: Employee Satisfaction & Motivation Survey, 2007, www.seek.com.au/investor/docs/esm_aus07.pdf. L Wroughton and J Topsfield, ‘World’s New Crisis: Food’, The Age, 25 April 2008. Australian Competition & Consumer Commission, ‘ACCC Takes Action Against GM Holden Ltd Over Saab “Green” Claims’, 18 January 2008, www.accc.gov.au/content/index.phtml/itemId/808355. United Nations Environment Programme, ‘Finance Initiative’, 2008, cited in Garnaut. Responsible Investment Association Australasia, Responsible Investment, 2007, www.responsibleinvestment.org/files/4G802MWSMG/RIAA%20 Benchmark%20Report%202007%20FINAL.pdf Havas Media, 2008, www.mipcom.com/images/100495/pdf/ mipcom2008_havas_media_survey.pdf The Australian Financial Review, 26 February 2008. Paul Hawken, Amory Lovins and Hunter Lovins, Natural Capitalism: Creating the Next Industrial Revolution, Earthscan, London, England, 1999. ‘Climate Leaders: The New Corporate Standards’, ECOS, April/May 2007. Terry McCrann, ‘Which PM is Less Popular than the Banks?’, Courier Mail, 30 April 2008. DuPont News Releases, 29 September 2006. The Australian, www.theaustralian.news.com.au, 9 September, 2008. GE Press Release, 28 May 2008. Tesco, www.tesco.com. ASX Corporate Governance Council, Principles of Good Corporate Governance and Best Practice Recommendations, Australian Stock Exchange, 2003.
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10
The Cleantech Opportunity John O’Brien
The clean-technology sector will be the success story of the next twenty years. Its global revenue has grown exponentially over the last few years and this growth is forecast to continue for many years to come.
What Is Cleantech? On forming Australian CleanTech in early 2007, I was asked several times whether I would be cleaning carpets or curtains. Although an increasingly common term in the United States for several years, ‘cleantech’ has until recently been relatively unheard of in Australia. The use of the term has been increasing and I’m happy to say that I have not faced one recent query regarding the rejuvenation of soft furnishings. But what exactly is ‘cleantech’ and why does the definition seem to change depending on where you look? Guiding principles may be given in an attempt to define what cleantech is. An example is the following from the US firm Clean Edge who state what cleantech is ‘A diverse range of products, services and processes that harness renewable materials and energy sources, dramatically reduce the use of natural resources and cut or eliminate emissions and wastes’.
Broadly, cleantech seems to encompass companies that have both environmental and economic benefits. However, each individual is left to decide whether a particular industry sector fits within the spirit of cleantech as defined by such principles. Some organisations clearly state what they are and are not including in their definition, but then do not go on to explain how these decisions have been made. The term ‘cleantech’ therefore tends to be a more amorphous industry group than, say, environmental services, and a less rigid investment-asset class than, say, financial services. Sectors that appear to fit into the definition of cleantech without dispute include the following: • • • • • • •
Renewable energy—wind, solar thermal and photovoltaics, wave, tidal, hydro, geothermal, biomass and biogas; Water technologies that increase either water or energy efficiency; Energy efficiency, green buildings and biomaterials; Waste management and recycling; Energy storage and fuel-cell technologies; Low-emission vehicle technologies; and Environmental services.
Other sectors are controversial with some cleantech definitions including them within cleantech by reason of their environmental benefits, while others reject them because of insufficient positive environmental benefits or too many perceived negative impacts. Examples are set out below. Biofuel Biofuel is an emotive subject. Seen by some as the saviour to high oil prices and energy security issues, but by others as the cause of rising food prices, food riots and increasing monoculture. Research into cellulosic and algae-based biofuels, if successful, may remove many of the downsides of current technologies. Carbon Trading Carbon trading is clearly driving much of the investment behaviour in cleantech, but it is questionable whether the act of trading has any
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direct environmental benefits. Through facilitating investment in environmentally-beneficial outcomes, it can, however, be seen as a key part of the cleantech chain that should be included. ‘Clean’ Fossil Fuels ‘Clean’ fossil fuels include natural gas, coal seam methane, underground coal gasification, gas to liquids, carbon capture and storage, and clean-coal technologies. These are often included in clean-energy indices and funds due to their reduced emissions profiles. However, despite the ‘clean’ tag, they remain fossil-fuel energy sources and are therefore, at best, only transition resources or technologies. Their inclusion in funds and indices have been highly advantageous in recent years with some stock prices in these sectors outperforming all others. A great example of this in Australia is the rise of the Coal Seam Methane (CSM) companies as the opportunity of Liquefied Natural Gas export using CSM reserves becomes more likely. Nuclear Power Nuclear power, along with its associated uranium production and treatment, clearly has a lower emissions profile than the fossil-fuel equivalent. The nuclear industry is highly likely to form part of the long-term global solution to climate change. However, deep concerns remain over the environmental and social impacts of uranium transport, usage and waste storage. There are arguments that the best place in the world for a nuclear power plant is at Roxby Downs, with its massive reserves, stable geology for waste storage and minimum transport requirements. An inconsistency in Australians’ objections to nuclear power is that there is little objection to the export of uranium to other countries for use in nuclear reactors yet we think it far too dangerous to use at home. If the concern is that high, surely the only responsible action for Australia would be to leave all the ‘nasty stuff’ safely in the ground. Maybe Australia’s most responsible action with respect to nuclear energy would be for the country to lead the world by demonstrating the safest, most integrated nuclear power plant in the world. This could be combined with a power park concept that demonstrates geothermal and solar thermal, and is connected to the grid
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through HVDC cables that also connect to the best wind and wave sites. A grand plan that it is detailed further in chapter 22. Agri-Businesses Agri-Businesses are included in many measures of environmental performance due to their clear interaction with the environment. Yet this interaction is not always a positive one for the environment and the communities involved. Some see cleantech as encompassing those companies that provide products and services to improve agriculture’s impact on the environment through, for instance, the use of water- and energy-saving technologies, and do not include the businesses that merely purchase these technologies. It is clear that decisions on what is included as being part of cleantech depends on the viewpoint and vested interest held. Lobby groups, investment-fund managers and participating companies all have desired outcomes that help shape their arguments on the definition. Despite this, cleantech is not is just another term for Socially Responsible Investments (SRI) or Environmental, Social and Governance (ESG) performance. Cleantech is a term that embraces organisations whose essence, whose raison d’être, is to provide environmental benefits. SRI and ESG look at incremental improvements in company performance and can be seen as ‘operational hygiene’ measures that find the ‘best in class’. Cleantech is about doing ‘more good’ rather than ‘less bad’. To those who ask ‘What is cleantech and what does it encompass?’, there is no definitive answer as both subjective opinion and vested interests are involved. However this should not detract from the multiple opportunities and benefits provided to investors, communities, employees and society by the work of the cleantech industry.
No Green Bubbles in Sight Some commentators have dismissed the cleantech phenomenon as being a mere ‘green bubble’, similar to the IT bubble of the turn of the century. However, the drivers behind cleantech’s growth are significantly different. First, there are many real assets being constructed to
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provide core services such as power, water, waste and recycling. Secondly, the demand for these core services is growing due to population growth and increasing wealth. Thirdly, as the world continues to use and deplete its natural resources there is increasing pressure on communities to act sustainably. Finally there is the recognition of climate change and the consequent regulatory regimes. This is a separate driver from those above and, while it will result in additional growth in some cleantech subsectors, it does not underpin the cleantech sector as a whole. As a result, the growth of cleantech will be unstoppable. Research and forecasts by Clean Edge indicate that the cleanenergy sector alone had global revenues of US$77.3-billion in 2007 and this is forecast to rise to over US$250-billion by 2017. In Australia, the definitive measure of cleantech performance is the ACT Australian CleanTech Index. This tracks seventy-five cleantech companies listed on Australian exchanges with combined fiscal year – 2008 revenues of over A$13-billion and a combined market capitalisation at the end of June 2008 of over A$15-billion. The ACT Index outperformed both the S&P/ASX200 and the S&P/ASX Small Ordinaries during the bull run of the 2006–07 financial year with a gain of 42.9 per cent. More interestingly, it also outperformed both of its benchmarks in the bear market of 2007–08 recording a loss of only 16.0 per cent. Being able to outperform in both good times and bad is exceptional and demonstrates the resilience of the cleantech sector. If the Australian growth matches the global forecasts, annual revenue for the Australian cleantech sector could exceed $40-billion within the next ten years. The dominant Australian cleantech subsectors are currently waste and wind, with large companies also present in water, biofuels and environmental services. An assessment of what subsectors will dominate in ten years can be made by looking at Australia’s areas of natural competitive advantage. With its abundant solar and wind resources, along with its water scarcity, the country is likely to see the emergence of large-scale solar generators and providers of waterefficiency solutions. Until recently the Australian cleantech market has lagged behind both its US and European counterparts. In the United States the
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strength of venture capitalists together with favourable regulation in some states has spurred innovation. In Europe, growth has been largely driven by regulation and mandated targets supported by financial gains through carbon trading. In both cases, the link to the finance industry has enabled the recent growth. Australia is now turning the corner and financial markets here are starting to see opportunities for profitable investments.
A Cure for Climate Fatigue Cleantech also has the advantage of implementing change through multiple local projects that affect all within a community. It is this aspect that in many ways, makes the growth of the industry most valuable. The ability to connect with and engage many individuals will highlight the opportunities and benefits available and will keep the focus on driving ongoing changes. This will be critical when negotiating an emerging challenge for those fighting the effects of climate change—‘climate fatigue’. Each day the public is bombarded with terrifying prognoses for the future that they and their forebears have created. Many people are understandably confused about the possible effects of climate change and feel an inability to make any meaningful difference. They sense a lack of control and eventually fear will give way to resigned boredom and the distractions of more immediate and local issues. So, ironically, as media exposure on the issue of climate change increases so too does the danger of climate fatigue. Yet it is essential that individuals and their communities do stay motivated and engaged with the solutions to climate change—it is not enough simply to rely upon scientists and politicians to alleviate the consequences. Cleantech provides the solutions that will deliver both global and local benefits, and ensure the community engagement is maintained. Climate fatigue may be compared with the well-documented phenomenon of famine fatigue. The BBC has recorded the example of Victorian England’s fatigue of the Irish famines and there are numerous examples in Susan Moeller’s book Compassion Fatigue. Everyone remembers their ‘first’ famine: the first one they really cared about. Mine was the Ethiopian famine in 1984. As news of ever more famines continue however, the length and depth of compassionate
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feelings reduces until there is a tendency to accept famines as unavoidable. Famine fatigue or, more generally, compassion fatigue occurs fastest when the suffering is far removed. Climate fatigue is no different, as shown by Russian President Vladimir Putin’s retort in 2002 that warming might be good for his nation saying ‘Maybe it would be good and we could spend less on fur coats and other warm things’. The effects of climate change are often seen as a problem belonging to the distant future and far-flung places of the world. However, recent Australian weather conditions—floods, fires and droughts— have focused many Australians on the immediacy and relevancy of the problems created by climate change. Extreme weather patterns elsewhere, such as the United States and parts of Europe, have had the same effect. Enthusiasm for change is high, both here and abroad, and fatigue has yet to set in to any great extent. To harness this enthusiasm and secure its benefits requires two aspects: first, local benefits must be visible to communities so that the benefits of change are clear; and secondly, networks and forums must be established to facilitate new connections and enable new collaborations. For example, the adoption of revised town planning to improve public transport, pedestrian and bicycle facilities while reducing suburban satellite housing will reduce commuter traffic and have a significant long-term impact on emissions. It may also facilitate an improvement in the overall fitness of the community. Similarly, networking and collaboration may be used to reduce food transport, leading to lower emissions, increased local production and possibly even more nutritious diets. Focusing on local benefits while also delivering part of a national or international solution is not easy. It requires collaboration and understanding between business, investors, academia, all three tiers of government and, most importantly, the general public. Providing a forum to have these conversations is a vital first step to delivering the greatest benefits from changes that are going to be required as a result of climate change. One example of this first step is the Adelaide Cleantech Network. This brings together all of the disparate groups and enables discussions to start on wider, more ambitious solutions.
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By changing the story from one of worry to one of opportunity, cleantech alters the whole dynamic of climate change. It is a twist on the concept ‘think global—act local’ which has historically been seen as taking local detrimental actions to achieve global benefits. Instead this is thinking about worrying global events and turning them into an excuse to deliver local benefits. Imagine the change to a region such as Australia’s coal-rich Hunter Valley once it moves on from fear regarding the decline of the coal industry to embracing the opportunities associated with becoming a centre of excellence of cleantech manufacturing and ‘green collar’ employment. The subsequent economic development, healthier work environments and improved prospects for all will make the community look back and be thankful that climate change became so serious. By focusing on how cleantech solutions can deliver local, as well as global, benefits and by starting new conversations and collaborative relationships, we have the opportunity to make climate change be seen as the great motivator to a better world. The future for cleantech, both here and abroad, is therefore bright. It has multiple global drivers and government backing, which makes it stand out from previous growth industries. As it grows, mainstream corporate Australia will buy in through purchasing and acquisition decisions and this will enable the entire economy to move towards sustainability. Through its facilitation of local benefits and community action it will maintain a focus on the required changes without lapsing into climate fatigue. By combining industry with investors to produce profitable, sustainable and local solutions, the cleantech sector will underpin and be essential for the transition to a sustainable world.
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11
Water Industry Cleantech Solutions Joe Flynn
When it comes to water, a reader of this book is likely to be someone who makes up the majority. Two out of three of the world’s population benefit from human civilization’s single biggest improvement in health: access to safe drinking and sanitation. This is the developed world. On the other side, two-billion people drink unsafe water and live with appalling standards of sanitation. The unsafe water contributes to illness and suffering that only stops when they die young. While applying cleantech to water will create many, many exciting opportunities, no opportunity is more important than bringing safe drinking water and sanitation to the entire world. Sadly, there are other ways water is killing life rather than sustaining life. Many parts of the world take more water from nature than can be sustained, causing ecosystem damage and loss of biodiversity. We then accelerate this damage by using water to transport our waste and pollutants, causing further decline of seas, rivers and groundwater, killing more species and often overwhelming nature’s ability to maintain a self-cleaning balance. The River Murray, the source of 91 per cent of Adelaide’s water in 2007, is below empty as we drain its wetlands; we are starving the Coorong which cannot sustain birds like the fairy tern whose population has declined from more than 20 000 to 6000 and faces a grave
risk of extinction1; sea-life habitat is in decline partially because of the pollutants in our stormwater and sewage dumped there; and in our desperation to reduce water demand to meet supply, many cities have made it a crime for a child to play under a hose in their backyard. Once these bad consequences were generally accepted as an acceptable trade-off: the price we pay for economic development and progress. That era of thinking has passed as we now understand that having a functioning, healthy environment is critical to sustaining society and business. There are three areas of water management that must be addressed to achieve a goal of a sustainable world: the rethinking of water resources; addressing agricultural use of water; and redesigning nineteenth-century water-governance systems for the twenty-first century.
Rethinking Water Resources Regions like the east coast of New Zealand and the populated southeast and south-west of Australia are likely to see smaller and less frequent rain events, and average temperature increases. A rule of thumb for these regions will that be a 1-degree rise in temperature will lead to a 10 per cent decline in rainfall and a 30 per cent reduction in run-off as drier soils absorb more. On top of this, demand is growing. Research indicates that over the next twenty-five years modernising and expanding the world’s city water systems will require approximately US$23-trillion.2 The demand for water infrastructure is exploding. An increasing, richer world population wanting to live in cities with ageing infrastructure is driving this demand. The challenge is made even harder because we do not start with a blank sheet of paper. Cities have histories, cultures, dense populations, property rights and deeply embedded political relationships that all demand respect and time. To meet this challenge requires adaptation and rethinking of how systems work to enable solutions with sustainable outcomes. This requires the adoption of cleantech solutions. Waste, for instance, can be seen as an untapped resource to which we have not yet applied sufficient imagination. Waste water is an example of something that was once seen as an inconvenience and is now viewed by many as a valuable resource.
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As detailed in Box 1, Australia’s largest water-recycling project, the Virginia pipeline in South Australia, takes purified sewage and distributes it to market gardeners. Box 1: Adelaide: Australia’s Largest Water Recycler Commissioned in 1998, the Virginia Pipeline Scheme is Australia’s largest recycling scheme and one of the largest in the world. A network of pipelines of more than 100 kilometres supplies over 10-billion litres per year of high quality Class A recycled water, suitable for use on food crops that are consumed raw, from Adelaide’s Bolivar waste-water treatment plant to market gardens and farms 35 kilometres away on the Northern Adelaide Plains. Approximately 250 growers covering an area of 200 square kilometres use the recycled water for horticulture irrigation. Irrigated crops include potatoes, various vegetables, olives and grapes. Importantly it reduces the effluent Adelaide dumps in the Gulf St Vincent and the damage this causes to fish and their habitat. A private consortium owns and operates the pipeline and, at the end of the contract term, ownership transfers to the people of South Australia via the government. Another principle that is common in cleantech solutions is biomimicry: harnessing or replicating nature and working with the natural systems. Box 2 details Australia’s first totally integrated watermanagement plan to efficiently harvest and manage systems for rainwater, stormwater, groundwater, recycled waste water and potable water. Box 2: Harnessing Nature to Purify and Store Water The City of Salisbury in South Australia extends from the foothills of the Mt Lofty Ranges in the east to the shores of Gulf St Vincent in the west. Water-flow from the Mt Lofty Ranges is harnessed and regulated in a series of flood-control dams constructed in the upper reaches of the catchment. These dams, constructed to handle a one in 100 year flood, effectively throttle down the flow of water into a series of pipes and open channels planted with reed beds to filter and cleanse the water of nutrients and heavy metals.
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The pipes and channels are the arteries for the flow of stormwater into a network of some twenty harvesting sites, or wetlands, developed by the City of Salisbury. Stormwater is further cleansed in the wetlands and grassed swales, which act as self-sustaining filtration and water-treatment systems. Treated stormwater is pumped via distribution mains directly to industrial and commercial users with high water dependency, while some is used for irrigating council parks and reserves along with schools and sports grounds. Large industrial users such as Holden and Michell, have reduced the amount of water they used to take from the River Murray by more than 1-billion litres by harvesting stormwater. Cleansed of pollutants, much of the stormwater is ‘banked’ in underground limestone aquifers to be accessed for industry and the community in drier months through aquifer storage and recovery. These developments are typical of the cleantech solutions the world needs: innovative water suppliers developing diverse sources of water. However, solving the bureaucratic challenges and finding the political will to make innovations happen on a large scale has proven very difficult. What prevents this happening on a large scale? Tough political decisions such as putting water prices up to pay for sustainability, and investing in water infrastructure and sources that create urban wetlands, keep more water in the River Murray, stop pollutants being disposed of into waterways, and create the wildlife habitats. If you relied on the media for understanding water you would probably think that Australia is running out of water. The story generally goes something like increasing population, climate change and drought are combining and we have no option but to drastically reduce our water consumption. While some of this is true and we definitely need to optimise water use, the conclusion that we are running out of water is wrong. We have a water-governance problem not a water-supply problem. A water-governance problem does not mean the people who work as managers in the myriad current and previous government organisations involved with water are the problem, it means the Water Industry Cleantech Solutions
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system is the problem. The system of governance includes policy, regulation, accountability, pricing and so on and it is failing to manage our water sustainably. Our water-governance system was not designed but is a bureaucracy that slowly evolved over almost two centuries. Until now we have ended up with a mixed bag of good intentions, politics and self-interest that is trying, but failing, to resolve the competing needs of our community, our environment and our economy. Recycling waste water and harvesting urban stormwater would typically provide at least 50 per cent, and as high as 90 per cent, of a city’s water needs. Water scarcity disappears if we are prepared to pay for the infrastructure to harvest, store and purify our stormwater and waste water. We could give water back to our stressed rivers and our diminishing bore-water reserves and revive the rivers, and animal and plant life that depend on them. The challenge of growing water demand is therefore not one of inadequate resources but rather of inadequate systems that have not yet driven sufficient innovation to use the available resources wisely.
Eating Water When it comes to water usage there is an elephant in the room or, more precisely, an elephant in every kitchen: agriculture. The global average household water consumption per person per day is approximately 250 litres, less if you live in a developing country, a little more if you live in a developed country. On top of this is approximately a further 5000 litres per day per person to provide your food, about half of that if you eat a vegetarian diet. CSIRO research indicates that if you eat a kilogram of steak once a week that will require almost 1 million litres of water per year, the equivalent of what four average Australian homes would consume in a full year.3 Excluding rainfall, New Zealand applies 74 per cent of their extracted water, water from groundwater or surface water, to agriculture. In Australia 65 per cent of water used goes into agriculture and more than half of that, 53 per cent, to grow pasture and grains. The key point: what food we eat as well as how and where we grow it, makes a far, far bigger impact on our water usage than the water we use at home. 146
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Box 3: Precision Irrigation: An Urban and Rural Tool Adelaide is home to some of the world’s leading precisionirrigation technology providers that take the guess work out of watering. Adelaide companies like Sentek and AquaSpy are global leaders of monitoring, control, communication and delivery systems that enable rural farm irrigators, such as farms and market gardens, as well as urban irrigators, like golf courses, parks, sports fields and home lawns and gardens, to reduce water consumption while improving turf or crop health. The technologies can monitor soil moisture content, communicate with weather satellites, monitor salinity and then use software to calculate and direct when water is applied, at what rate it is applied and precisely how much is needed. Water is delivered exactly where and when it is needed in precisely the right volume. Benefits typically include 20 per cent to 70 per cent in water savings and water costs, increasing crop yield by up to 50 per cent, deeper and stronger root growth, reduced pumping costs, less mowing time for turf, and greater resistance to disease. There is plenty of knowledge as to where this improvement could be found. Less than 10 per cent of Australia’s agricultural land uses drip irrigation with between 65 and 90 per cent using surface or sprinklers.4 Of the irrigation water taken from rivers or dams in the Murray Basin, typically more than 66 per cent is lost in getting the water delivered to the plant roots.5 While some farmers have invested in the technology and irrigation techniques to almost eliminate these losses, there are many who have not. Regions need to understand what the foods are that they have a comparative advantage in producing, and become a sustainable, food-producing hub for this produce, while withdrawing from the produce that they are not suited to grow. We must accept that buying local is not always beneficial for the environment and that while we encourage sustainable local food systems, we must also allow them to develop in tandem with what could be more sustainable national or global alternatives. In Box 4, renowned water expert Peter Cullen describes the situation as one of inevitable adjustment. Water Industry Cleantech Solutions
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Box 4: Irrigation in the Twenty-First Century We now face a horrible readjustment in rural Australia, similar to that faced in Goyder’s time where three to four wet years led to unrealistic expectations; now we have had forty years of unusually wet conditions in the Murray Darling Basin from 1950 to 1990, and the last fifteen years the Basin has been drying. Our refusal to recognise this meant we have allowed the major storages to empty, and they will not refill again without a run of wet years. The lack of water is already having a devastating impact on irrigators and their communities as we have already had the death of some permanent plantings in the Basin, and more can be expected from both lack of water and from salination of water. Irrigation landscapes will change. I expect a reduction in the area of permanent plantings and perhaps more emphasis on annual crops that can be planted once water availability for the season is known. Irrigation properties may become larger to cope with a mix of perennial and annual plants and more opportunistic irrigation. There will be an overall contraction in the area irrigated, leading to issues of stranded assets and increasing operating costs to those remaining … We have a tremendous opportunity to build an irrigation sector that can double the wealth obtained from around half the water.6 An example that captures cleantech applied to agriculture is an Adelaide-based company that produces and exports beautiful, luscious, vine-ripened tomatoes. The precision greening story behind these tomatoes is detailed in Box 5 and is truly amazing. Box 5: D’Vine Ripe Tomatoes D’Vine Ripe Tomatoes reuses city waste water, blackwater that has been treated to a level where it is safe, and purifies it further by passing it through reverse osmosis. It then adds in the specific mineral diet customised precisely for tomatoes, and this is fed to the tomato plants in a glasshouse where soil moisture–monitoring technology delivers the precise amount of water precisely when it is needed to optimise root growth and plant yield.
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Water is further supplemented by 50 millilitres of rainwater harvested off the roof every year. The glasshouse is more like an operating theatre of a hospital than a typical glasshouse. It is heated to a constant 25 degrees by using the waste heat of an onsite, gas-fired cogeneration electricity plant. The exhaust from the cogeneration plant is harvested and the CO2 is injected into the glasshouse, lifting CO2 levels from 380 parts per million, what they are out on the street today, to about 1200 parts per million. As well as reducing global greenhouse-gas emissions, the harvested CO2 nourishes the tomatoes that just love that CO2 and it adds to their growth. Now the amazing part, the numbers that come out of this business: twelve times the normal plant yield, using one-tenth of the water.
The essential ingredients for cleantech agricultural solutions are processes that create whole-of-value chain solutions to optimising water, energy and food production.
Unleashing Innovation through Deregulation Climate change has brought into sharp focus the need to live sustainably with the ecosystems that support life. As Nicholas Stern said, ‘The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response. This response will require … price signals and markets for carbon, spurring technology research, development and deployment, and promoting adaptation’.7 The same tools of price signals and markets needs to be applied to water. What do those terms mean for a typical city? They mean that competing wholesalers should be able to supply water and compete for the business of retailers, who in turn would compete for individual customers of households and industry, selling the water to reflect the cost of production and scarcity. Sources and technologies could include recycled-water projects, aquifer storage and green energy – powered desalination.
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Water utilities are often government-owned monopolies and return a valuable dividend that governments can apply to heath and education. Unfortunately the dividend comes at an enormous cost. New jobs that could come from a more dynamic water industry are constrained, the community suffers with parks, sports grounds and gardens turning brown, businesses that rely on water, like nurseries, suffer under restrictions, the River Murray continues to suffer as alternative sources of water aren’t encouraged and we continue to treat the vast majority of our stormwater and used water as waste, instead of recycling it. Innovation and sustainability is stifled.
Designing Sustainability into an Industry There are clearly many opportunities for the water industry of the future to be more sustainable. The problems of water-resource recognition, agricultural usage and governance systems present these opportunities for improvement. How therefore do we design sustainability into the water industry? The 1992 Rio World Environment Summit and the 2003 Johannesburg World Summit on Sustainable Development endorsed a number of objectives to improve water management including the transfer of operational responsibility as far as possible to the private sector. This objective is to separate the specifier and regulator of water services, government, from the provider or operator, the private sector, to improve the delivery of monopoly services by creating market mechanisms and addressing regulatory failure. Competition and involvement of the private sector in water is about unleashing the incentives that will encourage and reward innovation. It is about bringing discipline to the provision of services, measurement of performance and consequences when performance standards are not reached. Charles Landry, an international authority on city futures and the use of culture in city revitalisation, highlighted the importance of encouraging innovation: If incentives were given for people to be creative it would lead people and organisations to tread new pathways and establish new preferred routes … Being creative is a 150
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mindset … Creative people work at the edge of their competency, not at the centre of it. This sits with difficulty in large organisational structures, and in particular public organisations …8 If sustainable development is a form of progress that meets the needs of the present without compromising the ability of future generations to meet their needs, then sustainable water management needs to become much more adaptive and holistic: adaptive to a growing population, climate change, community attitude, politics, and our economy; holistic in counting environmental needs and costs, in treating groundwater, rivers and wetlands as interconnected, in connecting the separate pieces of government that collectively form our water-governance system. At a practical level we need to lift water restrictions while maintaining the education and promotion of sensible permanent water-conservation measures such as avoiding sprinklers in the middle of the day. We need to continue reducing our reliance on climate-dependent water we draw from rivers and catchments by developing a diverse supply mix including creating drinking water through desalination of sea water, purifying and reusing our waste water and harvesting urban stormwater. To embed this adaptive governance system that copes with the competing environmental, social and economic water needs we need to make the following reforms: Step 1: Give the Environment What It Needs We need to care for systems that sustain our existence and immediately reduce the stress on our rivers, lakes and groundwater. We do that by buying water entitlements from willing sellers, reducing over allocated groundwater entitlements and returning the water to the environment. When recycled water is applied to agriculture it should be directly linked to a reduction in groundwater entitlement. Step 2: Encourage Diverse Suppliers and Diverse Supply Sources Replace physical water restrictions with properly functioning, competitive water markets where water can be traded and suppliers can compete to supply water from sources like recycled water projects, aquifer storage, desalination, dams, and trading entitlements. Water Industry Cleantech Solutions
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Step 3: Independent Regulation Environmental standards, price, access, quality and other important controls and rules of supply and competition should be governed by an independent regulator with financial penalties for non compliance. Step 4: Remove All Barriers to Water Going to Where It Is Needed To ensure water is used where it is most valued, we need a shared water registry and transfer system to distribute the 154 023 entitlements for 21 642 769 million litres of water entitlements in New South Wales, Victoria and South Australia. Step 5: Simplify Water Recycling and Aquifer Storage Reuse There are many impediments that make water recycling, stormwater harvesting and aquifer storage and reuse complicated and slow, such as complex approval processes and low urban water pricing. Step 6: Expand the National Water Initiative The National Water Initiative, Australia’s overarching water policy that drives the agenda for state governments, currently needs to be expanded to cover urban water issues in the same depth as rural. Step 7: Make Water Reform Happen Ministerial-level responsibility for water policy is spread across a mix of water, environment, infrastructure and planning at both the state and federal levels. This leads to complexity in policy development and implementation. The Council of Australian Governments should increase its focus on water to ensure progress is being made and any impediments are being removed. None of the steps outlined above are fresh ideas: industry and various water experts have been promoting them, in part or in full, for some years. To date we have been prepared to make the environment pay, to make future generations pay, to make our economy pay. We simply have not been prepared to find the political will to make the necessary reforms and start paying for sustainable water solutions. We can blame our politicians for procrastinating, but in great democracies governments largely reflect the will of the people and
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that means we have failed to give politicians the clear message that we, the community, demand and are prepared to pay for sustainable water management. The changing climate provides the opportunity to push through these reforms and build governance systems that promote sustainability, innovation and adaptation. We will not solve our water problems by using the same thinking that created the problem. A fresh approach is needed and cleantech is part of that fresh approach. Once we may have done that out of goodwill towards the environment. We now have the knowledge that we need to do this to not only sustain our environment but also to sustain our communities and economy.
Notes 1
2 3
4 5 6 7 8
Associate Professor David Paton, ‘Lessons Learned from the Coorong’, presentation, University of Adelaide, 2007, www.water.adelaide.edu.au/ events/2007/paton.pdf Viren Doshi, Gary Schulman and Daniel Gabaldon, ‘Lights! Water! Motion!’, Strategy + Business, 2008. Professor Wayne S Meyer, Water for Food: the Continuing Debate, CSIRO Land & Water, 1997, http://www.clw.csiro.au/publications/water_for_ food.pdf Australian Bureau of Statistics, Water Account 2004–05, p. 74, 2006. Meyer. Professor Peter Cullen, Schultz Oration, Flinders University, November 2007. Nicholas Herbert Stern, The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge, England, 2006. Charles Landy, ‘Rethinking Adelaide—Capturing Imagination’, Thinkers in Residence, 2003.
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12
Branding Beyond Carbon Fraser Bell
As we transition to a carbon-constrained world, there will be increasing interest in the ‘carbon component’ of products and services. Indeed there is a reasonably long history about how carbon can be tracked through the notion of ‘carbon branding’. This chapter analyses the notion of carbon branding with a particular emphasis on the wine industry in Australia and the influence of the needs and aspirations of UK wine retailers. The author believes that the ‘carbon performance’ of products (particularly products such as wine) have been overstated as the world focuses on carbon’s place in the climate-change debate. Carbon is simply one part of the environmental footprint of a product (or service) and an even smaller part in the ‘total triple bottom line’ performance of an organisation. Nonetheless, there has been a disproportionate amount of interest in the question of carbon. In Australia, this issue has taken on a life of its own as a result of the Federal Government’s decisions to ratify the Kyoto Protocol and implement a Carbon Pollution Reduction Scheme (CPRS) in 2010. One only needs to look to Europe to see the extent to which existence of similar schemes has established carbon as a key issue in the minds of business, the public and consumers.
Moving forward, the author believes that there will be less emphasis on carbon and more focus on other issues such as fair trade, social responsibility and resource use, particularly with a focus on water. In the meantime however, there will continue to be debate about the carbon aspects of products, and comparisons will be made between products and services for the purposes of gaining a market edge.
Aspects of Carbon: A Framework ‘Carbon’ can be analysed in terms of its impact on a product or service (and in turn business) in four particular ways. First, the direct cost impacts; second, the risk presented to a business; third, the impact on the market brand; and fourth, the opportunities for new business as a result of carbon. By way of an example, the impact of carbon in terms of the cost of doing business can be measured by reference to the increased cost of business inputs such as energy. Some businesses will be acutely sensitive to increases in energy prices and others may not. For example, the author understands that three of the big four banks in Australia have declared to the Carbon Disclosure Project that their energy costs are in the order of 0.3 per cent of operating costs. While these figures may be large in absolute dollars, given the size of the banking businesses, it is clear that an increase in the cost of energy is unlikely to be the major driver for the organisation to pursue energyefficiency opportunities. The gains are simply too small in terms of cost. (That is not to say that these institutions may not pick up the ‘carbon challenge’ for other reasons.) In respect to risk, one example might be the extent to which the suppliers of services to a business might be at risk as a result of either emission trading schemes or indeed climate change itself. Consider the agri-business sector. Anyone who is a farmer will realise that moving forward, the impacts of climate change will have a direct impact on the ‘riskiness’ of that sector. Businesses that depend on the health of the farming sector, therefore, inherently face a commercial risk as a result of the impact to climate change. The third area, which is the focus of this paper, is the question of brand. Some businesses will take the view that their brand cannot be enhanced by its ‘green performance’. Typically monopolies are
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unlikely to pursue a brand as a point of differentiation simply because they do not need to establish a point of differentiation. However, it is clear that in a competitive market environment, points of difference between products and services can be highlighted as part of the product-placement strategies for a company. The question of ‘green’ is becoming an increasingly important part of the ‘brand value’ proposition. This paper will focus particularly on that aspect of the impact of carbon issues on a business. The final issue is the extent to which the question of carbon and associated emissions-trading schemes establish commercial opportunities to provide a new source of business or enterprise for a particular line of products and services. For example, the extent to which an emissions-trading scheme creates a trading environment for carbon means that certain businesses such as accounting and merchant banking will enter the business of trading those products. Professional-service providers are up-skilling to provide additional services to their clients in light of the proposed CPRS. Again, there may be a number of businesses that will ‘stick to their knitting’ in terms of their product offerings, as the CPRS and the question of carbon as a whole has no real impact on the opportunities that they can harvest.
Carbon Branding Turning then to the notion of carbon branding, it is appropriate to put this issue into some context before analysing a series of examples relating to wine and motor-vehicle advertising. The term ‘greenwash’ was officially inserted in the Oxford English Dictionary in 1999. It is relevantly defined as ‘Disinformation disseminated by an organisation, etc, so as to present an environmentally responsible public image; a public image of environmental responsibility promulgated by or for an organisation, etc, but perceived as being unfounded or intentionally misleading’.1 An alternative definition was promulgated by Life Futerra as ‘Misleads the public by stressing the environmental credentials of a person, company or product when these are unfounded or irrelevant’.2 In an economy where the market is ‘king’, it is important to realise that the market can be misinformed in a number of ways and
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a sub-optimal market outcome will prevail if there is market failure. One example of market failure is the extent to which statements or claims about the attributes of a product or service are wrong and a consumer is drawn to purchase that product or service in the belief that a certain outcome is being achieved. The Greenwash Guide refers to interesting research about the extent to which UK consumers have an inherent mistrust about green information from government and business. It is noted that as little as 10 per cent of the consumers believe what they are told.3 If you assume there is some degree of focus within an organisation to establish its green credentials, and therefore resources are applied to that strategy, a figure as low as 10 per cent in terms of the credibility of those claims should be a concern to at least the marketing side of the business community. If effort is made to establish a ‘green pedigree’, there is usually some corporate strategy behind that effort which may in fact be a waste of time and energy on those figures. Further, there is the inherent fact that consumers are misled and that itself should be grounds for concern. Evidence of the extent to which consumers see misleading green advertising as critical can be looked at in terms of the trends for complaints by consumers to advertising-standards authorities about grievances associated with green claims. The United Kingdom’s Advertising Standards Association has been tracking this data for some time. Its Annual Report of 2007 indicates that environmental complaints about advertisements have increased five-fold since 2006.4 This surely demonstrates there is an increased level of interest and angst in the consumer market about these issues. Many authors have tried to identify what are the hallmarks of risky green statements about environmental performance or actual carbon pedigree of a product. There are ‘10 signs of greenwashing’ identified in the Futerra Sustainability Communications publication. The ‘logic’ behind these signs can be analysed in the following eight categories. Fluffy Language / No Proof Substantiation / Incredible Claims This category refers to the use of terms that have no real meaning in that they cannot be substantiated. For example, ‘eco-friendly’, ‘earth
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safe’ and ‘sustainable’. These claims involve two sets of risks. First, the risk of misinterpretation. If a term has an unclear meaning, there is potential for consumers to have a different understanding of the term compared to the advertiser. It is a basic principle of misleading and deceptive conduct that it is the consumer’s assessment of the meaning of a term that is relevant when determining whether or not the consumer has been misled, rather than the author’s interpretation of a particular term. Accordingly, there are a significant number of ‘risky words’ that need to be analysed in terms of a claim. The second issue is the absence of an ability to substantiate the claim. This notion is directly related to the lack of certainty about the term in the first place. The third issue is the claims that are simply incredible and intended to distract the consumer from some of the fundamental attributes of the product. Claims are simply too broad in certain circumstances to be meaningful or accurate, for example, if arsenic were described as ‘eco-friendly’, or ‘copper sulphate’ were described as ‘safe for the environment’. Green Products vs a Dirty Company This category of claims relates to a statement that has been made by a company about its products in an effort to get some reflected glory about its actual underlying environmental performance. If you like, the extent to which a cigarette company markets its cigarettes as ‘organic’ or ‘eco-friendly’ may be seen as suggesting that the actual practices of the underlying company are environmentally friendly. Claims like this also suffer from being misleading under the first category. The oil industry has been vulnerable to a number of criticisms about this type of advertising. There is a reasonably notorious advert by one oil company that involved the emission of flowers from the end of smoke stacks at an oil refinery. The overall impression was that the refinery itself made a positive contribution to the environment from its emissions. Suggestive Pictures The example just given in respect of the oil refinery falls into this category but nonetheless, the use of a picture can make a consumer conclude that there is some environmental feature about the product
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that is ‘green’. The author has seen one example where the use of a deer in a forest has been used by a car company to try and soften the perceived environmental impact of a vehicle particularly in terms of emissions. The ‘feel’ of the advert is that there is a natural connection between the use of the vehicle and the environment. Clearly if the vehicle is using petrol, it is contributing to the environmental problem. Irrelevant Claims This category relates to a series of claims made by the advertiser that have nothing to do with the performance or pedigree of the product. One of the more notorious and older claims relates to the juxtaposition of dolphins in advertising imaging relating to a washing detergent. The inference was that ‘no dolphin was injured as a result of the making of the product’. The product had nothing to do with dolphins, and claims such as that clearly create an inference that the use of the product has a positive benefit on an environmental icon such as a dolphin. Best in Class: Comparative Statements This category relates to statements of comparison between the performance of particular products. In the author’s mind this is likely to be an area of particular concern in the future when competitors complain about the environmental claims made by one another in an effort to secure a market edge. This is an area which is particularly self-evident in the motor-vehicle industry where different car companies are making claims about the relative carbon performance of their vehicles. Some time ago, the point of reference for efficiency for a vehicle was the number of kilometres that could be travelled using a litre/gallon of fuel. Increasingly now we see advertisements for motor vehicles specifying the grams of carbon dioxide that are emitted by the vehicle over a given distance travelled. If you like, the measure efficiency has gone from fuel consumption to carbon emissions. Whenever there is a comparison based on averages, there is room for doubt about the integrity of the comparison. The old saying that there is ‘truth, lies, damn lies and statistics’ is true in this area. There have been a number of complaints to advertising-standards agencies around the world about car advertisements where there is
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simply a lack of rigour in terms of the comparison of the performance between two vehicles. The statement that a motor vehicle is ‘best in its class’ is fraught with danger unless there is significantly detailed analysis about what is in the class, what are the parameters for comparisons within the class and how does one determine who is the best in that class. Jargon The use of new words seeking to establish a green credential is fraught with danger primarily because there is no common understanding about what the words mean. The use of ‘gobbledygook’ is sometimes seen as the hallmark of clever advertising. The terms create an impression without conveying any accurate information. A useful test to determine whether or not a term used in some form of branding is gobbledygook or jargon is to ask three people independently what the term means. Unless there is absolute identity between the three of them as to what they think the term means, you can assume that the term is jargon and therefore is capable of being misleading and deceptive. Imaginary Friends or Endorsement There has been a trend in recent times for suppliers of products and services to seek to verify their green credentials by relying on some form of third-party endorsement or certification. Much in the same way as the Quality Assurance ISO 9000 logo was used to create some impression of system or structure within an organisation that delivered a quality outcome, the use of third-party certifiers and auditors is becoming more mainstream. The certification agency provides a service to verify the claims made in respect to the product or service and, in return for a fee, the product or service can use a logo. Comfort should be drawn from that affiliation by the ultimate consumer. The author believes that over time, the next wave of ‘green scandals’ will relate to the rigour (or lack of rigour) associated with those certification bodies. The certification process is essentially selfregulated, as these are statements by organisations about their level of confidence in their own systems, and the extent to which they have audited the systems of their clients. In large measure, there is some safety in using the certification process, as the provider of products
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and services can ‘outsource’ the risk to that certification body. However, if the certification body fails to perform for one particular client and its logo or brand is somewhat notorious, there is a risk of backlash among all of its clients. The Outright Lie or Fib In this category a statement is simply a lie and should be dealt with harshly. In terms of the top areas of risk for greenwashing, the Advertising Standards Association in the UK identified the utilities sector (particularly electricity and motor vehicles) is the area where the claims are of most concern. This makes sense given that the increased focus of the climate-change debate on energy (both stationary and transit) raises the awareness of consumers about their impact on the problem of global warming. Utilities, particularly in the area of renewable energy, have redefined themselves. Motor-vehicle companies need to establish their environmental credentials, particularly in comparison to their peers. The Broadcast Committee of Advertising Practice Code indicates that the most significant topics of complaint in 2007 were ‘truthfulness’ followed by ‘substantiation’ followed by ‘environmental claims’ and then ‘comparisons and comparative advertising’. As indicated earlier, these are the areas that are likely to be the riskiest and therefore it stands to reason that most complaints will be made about these areas. It is suggested that a significant number of the complaints in the past have been made by consumers who feel aggrieved that they have been misled, particularly if the level of trustworthiness is as low as 10 per cent. However, as indicated earlier the author believes that competitors will complain more in the future than they have in the past.
Wine in Australia: An Example I turn now to the question of wine as a particular example. In Australia there has been a significant focus on trying to demonstrate the carbon credentials of wine for the purposes of meeting the perceived or actual requirements of the market in the UK. The CEO of Tesco, Sir Terry
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Lehay, has been reported as making the following comments about the notion of a carbon label, that is a statement on a product about its carbon performance: Customers want us to develop ways to take complicated carbon calculations and present them simply. We will therefore begin the search for a universally accepted and commonly understood measure of the carbon footprint of every product we sell—looking at its complete life cycle, from production through distribution to consumption. It will enable us to label all our products so that customers can compare their carbon footprint as easily as they can currently compare their price or nutritional profile. This is a large order, as anyone familiar with life-cycle assessments knows how complicated they are. However, a large supermarket chain in the UK believes that the customers will care about the carbon performance of their products. A corollary of that conclusion is that the better the carbon performance, the more likely it is the consumer will choose that product. What is not clear is the extent to which consumers will pay more for a product with a better carbon footprint. Australian wines’ carbon profile was originally assessed in the UK by reference to the concept of ‘food miles’. This is a metric that asserts that the further a product has to travel to market, the greater its carbon footprint. Largely discredited at the moment, it is still an indication of the extent to which carbon impacts were used to assess the relative performance of products. In the context of wine, for example, it is clear that Australia is further from the UK than France is. However, a significant amount of intellectual capital and money has been spent by a variety of stakeholders to demonstrate the efficiency with which Australia can deliver wine to the UK market by sea compared to the delivery of wine by the French to the same market by road. The debate about food miles and carbon costs associated with transport to market has led to a discussion about whether Australian wine should be bottled in the UK as opposed to bottled in Australia and freighted to the UK. There is no doubt that a significant component of the weight of a wine bottle is the bottle. However, the author
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believes that this debate has as much to do with the desire by the English to limit the importation of waste as it does to minimise the carbon impact of the transport of wine. After a bottle of wine is consumed, the bottle is waste. At the moment, the author understands that there is a significant amount of coloured glass that is imported to the UK through wine (and particularly beer) and it is difficult for the English to find a home for that ‘waste’. If wine was bottled in the UK, there would be a new market for the recycling of glass to manufacture wine bottles and the waste targets that the UK has as part of its EU commitments would be easier to achieve. In passing, the author wants to make the point that a lot of environmental issues such as waste and water have been overshadowed by carbon. The author suggests that anyone looking at the question of carbon in situations such as this should ask whether there is another, more pressing environmental imperative than the statement about carbon.
Sustainability and Carbon Finally, it is important to realise that carbon is just but one factor of the notion of sustainability. If one looks at the Global Reporting Initiative (GRI) framework, there are a number of characteristics about an organisations performance from the triple-bottom-line point of view. The first point to note is the GRI relates to organisational performance rather than product performance. However, it is a credible tool with a significant amount of uptake and it provides a useful reference point. The GRI focuses on assessing the performance of an organisation by reference to a number of particular aspects that relate to economic, environmental and social impacts. These notions are becoming more significant particularly in the minds of investors. In passing it is worth noting that in terms of the seventy-eight individual aspects of an organisation that are analysed for the purposes of the GRI, only five relate to carbon—a mere 6 per cent. The author believes, therefore, that the carbon aspect of products and services is being overstated. Carbon performance will not always continue to be ‘front and centre’. Issues relating to resource allocation, resource management and particularly biodiversity, are likely to become more important in the future. Very little work has been done, in the author’s
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mind, in addressing these risks, particularly in the wine industry. However, to the extent that carbon took us by surprise as a point of difference, we should start preparing to look at these other characteristics of products so that we are not left behind.
Conclusion Questions of carbon branding and advertising have been around for a while. Market trends suggest that more producers of products and services than ever are making statements about their carbon performance. Those statements are not without risk, and in the future the author believes that competitors will be the chief complainants about the advertising strategies adopted in the area of green marketing. The assessment of the carbon footprint is a complex issue that does require a significant amount of thought. It is very difficult to make a complex issue simple for the purposes of communication to the consumer on a label. The author believes that carbon will become one of a number of issues in the future whereas at the present it seems to be the issue. As we move to a carbon-constrained economy, some may take the view that carbon will become more important as an indicator of performance. The author does not agree. The author believes that the current fascination with carbon is largely a result of the debate associated with climate change and global warming. As the other environmental imperatives, which may be consequences of global warming and climate change, become more important the risks presented by the consumption habits of people in the developed world will focus on those aspects. Companies that move forward to a more holistic branding beyond carbon will find themselves with a competitive advantage in the future.
Notes 1
2 3 4
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Oxford English Dictionary, 10th edn, cited in Futerra Sustainability Communications, The Greenwash Guide, www.futerra.co.uk/downloads/ Greenwash_Guide.pdf ibid. Accountability and Consumers International, What Assures Consumers on Climate Change?, June 2007, p. 23. Futerra Sustainability Communications, The Greenwash Guide, p. 11.
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Reasons to Be Cheerful Dave Sag
Thinking about climate change can be a depressing experience for most people. Stories in the paper tend to either dwell on the downsides of the so-called carbon economy by emphasising the short-term price hikes that seem inevitable, or they revel in what I call ‘climate porn’, that obscene thrill some people indulge in when they pour over the latest natural or human catastrophe to hit our beleaguered planet. None of this is helpful, alas. But as someone working at the very coalface of the carbon economy, I have a very different view of things. I am not a religious person. I don’t believe in ghosts, gods or magic. I do, however, have faith that the human race will not sit idly by and watch the tragedy of the commons be writ large. Indeed, since the looming threat of climate change started to make regular appearances on the front page of the papers, and Al Gore’s An Inconvenient Truth pushed global warming to the front of people’s minds, my company Carbon Planet has been approached by a veritable flood of business leaders for advice on managing their climate impact. Initially it was mostly marketing executives coming in to see us, looking for a way to combine their, often personal, ambitions with respect to climate-change mitigation with a need to differentiate their products, services or business in the market by being seen to
be doing the right thing. Following Kevin Rudd’s election and subsequent ratification of the Kyoto Protocol, a move lauded around much of the world as bringing Australian environmental policy in from the cold, we noticed a change in the types of people coming to see us. All of a sudden it was the finance departments contacting us, talking the language of carbon assets and liabilities. At a recent meeting of industry leaders Carbon Planet’s Executive Chairman Jim Johnson explained that ‘the carbon economy is the world’s response to the threat of global climate change’. It’s a subtle point that he was making. Economists from Stern to Garnaut have confirmed, in meticulous studies, that the costs of inaction are certain to be higher than the costs of taking immediate and lasting action to dramatically reduce the greenhouse-gas emissions resulting from our economic activity. Carbon-trading schemes have been proposed and tested and, in many cases, are now operating successfully to efficiently channel funds from polluters to industries and technologies that reduce or eliminate greenhouse pollution. Of course there will be winners and there will be losers in this game. The losers, who have had ample time, some thirty years in fact, to understand that this day would come, are squirming now; thrashing about in a panic as their industries face some of the strictest regulations ever imposed. They are finally facing a government, and a public, that is simply refusing to allow them to continue externalising their costs. Yes, the price of energy may well go up, but to be accurate the cost of energy will stay the same. The only difference is the price will now properly reflect the true costs, rather than be discounted by allowing energy consumers and producers to treat the atmosphere as an open sewer. The winners will be those who, in many cases, have run terribly inefficient ships for quite some time, and have a tonne of ripe and juicy cherries available to be picked. The Australian Government will be setting reduction targets for many key Australian industries. Firms able to reduce emissions even further than their targets will have valuable emissions permits they can then sell to other, less adaptable industries. Here’s a hypothetical example. Imagine you run a firm that emits 100 tonnes of CO2e per year and the government has set a reduction target of 10 per cent. You will be allowed to buy, via auction or allocation, 90 tonnes of
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emissions permits, meaning that you must either reduce your emissions accordingly, pay a penalty rate, or buy permits from someone else. The price of the permits is guaranteed to be lower than the penalty rate, but higher than the price you paid for the permits you bought from the government so it will make sense to buy those permits rather than pay the penalty. But say you do find significant emissions savings and at a fairly low cost. This is not an unlikely scenario for many firms, as most firms tend to waste a lot of energy. Let’s say you’ve reduced by 20 per cent, so now you have ten permits left over. You can either ‘bank’ them, holding them over for next year when the thresholds come down even further, or if you are confident you have even more cherries to pick, you can sell those spare permits to those firms who can’t make their own targets. Let’s say you do that. Your neighbour’s emissions have now been effectively reduced to their threshold, but at a serious cost to themselves. Overall the system applies economic pressure in favour of widespread emissions reduction and, as the thresholds tighten, we can expect consequent emissions reductions. But there are other economic pressures that make it attractive for firms to go beyond merely meeting mandated targets and push for complete carbon neutrality. For listed companies it makes financial sense to do this and get themselves listed on the various green or ethical indexes, giving a potential boost to their price to earnings (P/E) ratios and thus adding significantly to their market capitalisations, and thus to shareholder value. On the dark side of this equation the reverse is also true. Companies that have not moved to address their carbon liabilities face shareholder revolts, lower P/E ratios and consequent capital flight. These pressures, brought to bear in the voluntary carbon markets, are already proving to be very effective with schemes like the Carbon Disclosure Project, initiated by shareholder groups, gaining momentum globally. While some industries remain recalcitrant, and run the risk of losing their social license to operate as a result, many more are taking action right now to ensure that they are part of the solution to what has been described as the most significant challenge the people of the world have ever faced. My money is betting that we’ll find a myriad ways to sever the links between energy production and
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pollution, fold economic externalities into the real price of goods and services and stave off catastrophe. If I’m wrong, it’s our children who’ll pay the price, but it will happen in our lifetime and won’t they just love us for it?
Part 4 Investor Opportunities
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ommunities and businesses are the building blocks of the opportunities but it is investors who wield the real power that will
facilitate the changes that need to happen. The engagement of the investment community in low-carbon investments is critical to the transition, and communities, businesses and governments must look to facilitate and encourage this investment. It is apparent however that this investment will not be made as a service to the planet but rather because the investment returns are compelling. This particularly appears to be the case for those investors who are the early adopters and consequently accept the highest risks. One of the world’s earliest large-scale adopters was James Cameron, the founder of the UK’s Climate Change Capital, which has US$1.6-billion invested in companies, projects and technologies that tackle climate change. In an interview he gave with the Australian Financial Review on 14–15 June 2008, he described himself as an ‘environmental capitalist’. His view is that the key to saving the planet from climate change is business, and he urges business leaders to focus on the systematic risk involved in not dealing with climate change. To summarise its vision, Climate Change Capital’s motto is ‘We want to create wealth worth having’. While there appear to be plenty of opportunities, much of the financial services industry appears to remain in the dark. In an October 2008 report, the Financial Services Institute of Australasia released a report that stated that ‘an alarming knowledge gap exists between climate change experts and Australia’s financial services sector’. The
key findings of the report indicated that the short-term, return-driven nature of the industry is largely to blame for a failure to look beyond the next financial year. An interesting initiative that may help to solve this lack of engagement is the United Nations Principles for Responsible Investment (UNPRI). The UNPRI has the objective of developing and implementing a set of global principles that facilitates the integration of Environmental, Social and Governance (ESG) issues into mainstream investment practices. The Principles for Responsible Investment reflect a growing view among investment professionals that ESG issues can affect the performance of investment portfolios. While the focus of this chapter is squarely on the investment opportunities that are emerging, what may in the end drive much investor behaviour is the decline of those businesses that have not adapted to the low-emissions world. Commenting on the financial meltdown at an investor summit at the United Nations in 2007, Al Gore said ‘The assumption that you can safely invest in assets that come from business models that assume carbon is free is an assumption that is about to go splat. You have lots of assets, many of you do, in your portfolios right now that truly do deserve that epithet “subprime”.’ The scale of the investment opportunities is massive. This section features the views of those who are leading the way in both the carbon mechanisms that enable the investment and those who are mobilising the capital into low-emissions solutions. That the authors come from pension, listed equities and investment banking funds shows the breadth of activity and the corresponding opportunities that are available for the far-sighted. The section starts with a description of carbon financing and ends with a global overview of investment activity.
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The Instrumentalisation of Carbon Tenke Zoltáni
This chapter discusses the emergence of carbon as an asset class to reveal opportunities beyond simply carbon dioxide (CO2). Infrastructural and developmental opportunities are made available via channels that materialise through the instrumentalisation of carbon. International collaboration, the formation of strategic alliances and the innovation in financial markets combine to define carbon as an asset. Despite the credit crunch, carbon can be expected to remain a robust investment, opening doors unforeseen as recently as five years ago. The chapter ties these themes together to show that not merely hot air, CO 2 has created innovative structures grounded in its commoditisation. In 1997, the Kyoto Protocol acknowledged carbon as a commodity. Kyoto gave a nod to the developed and developing world that CO2 was not simply hot air, but rather a semi-tangible asset that can be applied as an instrument towards mitigating global warming. This meant distinctly, that as an asset class, carbon could be instrumentalised into an internationally recognised financing tool for combating climate change. By kick-starting the commoditisation of carbon into both asset class and instrument, Kyoto paved the way for commercial opportunities beyond CO2.
In the process of instrumentalisation, market players manipulated the unexplored opportunities of structuring the asset into satisfactory—and economically pragmatic—definitions. This entailed not only the development of markets such as the European Union Emissions Trading Scheme (EU ETS), the Clean Development Mechanism (CDM), and voluntary initiatives, but also the creation of derivative financial products, exchanges, indices and risk-based pricing structures. During this process of defining carbon as a financial instrument, however, market participants could not have imagined the breadth of opportunities that would emerge as a result. Infrastructure and developmental opportunities arose and continue to emerge from a micro intra-institutional level, to a macro international scale, also encouraging collaboration on a supranational level.
Economic Foundations Ronald Coase spearheaded the emissions market with his 1960 article ‘The Problem of Social Cost’ with a corollary that became the Coase theorem. The theorem focused on solving the problem of externalities in society and stated that in the absence of transaction costs (admittedly quite a caveat), bargaining will lead to an efficient allocation of goods regardless of the initial allocation in a system. Applied to CO2, viewed arguably as the most significant externality of the twenty-first century, Coase’s theorem can be understood to explain the emergence of the emissions-trading market. Regardless of the initial ‘allocation’ of CO2—much greater for the West in terms of output since industrialisation, while Asia and Africa have emitted far less in total—trading-emission rights will lead to an efficient allocation according to Coase’s theorem. The most polluting nations (or installations) will receive, or be forced to purchase, an economically equitable proportion of emission rights in comparison to less-emitting entities. In practice, obstacles to efficient allocation, that is transaction costs, exist, but as the market develops these obstacles will diminish. A solid example of Coase at work is the emergence of the sulphur-dioxide (SO2) and nitrous-oxide (NO2) markets, which developed in the United States in the late 1980s to address the pollution externality facing US skies from industrial sulphur-dioxide and nitrogen-dioxide emissions. Given a fixed cap on allowed emissions, the subsequent establishment of an auction and exchange for
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SO2 and NO2 emission permits created a financial incentive for firms to find the most cost-effective solution to reducing pollutants. In the early years of the market, the price for an avoided tonne of SO2 fluctuated from lows of US$65 to highs of US$1550. Fourteen years later, the US SO2 market is considered a success story: it demonstrated that externalities can be overcome by policy-initiated but market-driven mechanisms. Importantly, the discourse surrounding SO2 and NO2 reached a level to fuel public support and financial innovation. In two decades the 18 million tonnes of SO2 in the atmosphere were reduced to 9 million tonnes, the cost of compliance was less than a tenth of what was expected, and the United States achieved US$100-billion of annual reduced medical expenses associated with lung disease. Today, the cost of eliminating sulphur-dioxide emissions averages US$150 to US$200 per tonne, while the environmental damage produced by one tonne of SO2 assessed by the EPA is nearly US$4000. Turning to the nascent carbon markets following in the footsteps of the SO2 and NO2 markets, the lesson that can be gleaned is the importance of recognising the pollutants as assets in their own right. Instrumentalising these assets into financial returns drives innovation and investment.
Lessons Learned Commerce-led conceptions are reinforced in society by businesses and financial institutions as the primary market-makers. After the issue of CO2 came to the fore and governments decreed regulatory restrictions, economic approaches rooted in neoliberal thought took hold and provided the impetus for the conception of the EU ETS. The establishment of this economic infrastructure, traceable to mercantilist philosophy in the seventeenth century, Smithean economics and the Industrial Revolutions of the eighteenth and nineteenth centuries, has led Western governments to gravitate toward market-based solutions. By encouraging free competition among firms and hastening policies towards increasingly green agendas, the impetus for carbon offsetting began. Offshoots into other sectors followed, generating opportunities beyond carbon. The key driver, an ideological-free market-driven hegemony in place, pushed discourse and action toward market solutions rather than taxing. This came to be viewed
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(while still disputed) as the economically efficient solution, and was soon supported by a suite of innovative financial instruments. After the link between CO2 and anthropogenic global warming was established, and carbon thus identified as an externality in need of mitigation, the process of carbon’s commoditisation can be traced from ideology (neoliberalism, Coasean economics), to inception (first emissions market in the United States), to regulation (Kyoto) to action (establishment of carbon markets). The focus of this chapter is on the action—how was carbon instrumentalised after Kyoto established the flexible market mechanisms for addressing climate change. The takeaway is the financial innovation catalysed by Kyoto.
Innovative Instruments The role for an emissions exchange was already confirmed by the precedent set in the US SO2/NO2 market when the EU ETS was launched. The emergence of the EU ETS broke ground on another continent—this time Europe—yielding opportunities beyond carbon. The financial infrastructure that was built, and is still being developed across the EU, necessarily carried with it heavy clout for other industries. From the primordial involvement of environmental activists, NGOs and government ministries pushing for an emissions cap, rose the skeletons of financial infrastructure. It carried with it researchand-development (R&D) investment, particularly across the most obviously impacted industries (energy, power, cement, steel, minerals) and subsequently caught the attention and pocketbook of consumers. While the purview of this chapter will not allow or encourage a delineation of all the opportunities afforded by the conception of the EU ETS, it will suffice to say that most sectors of society were impacted and encouraged to either innovate or adapt to emissions reduction. As carbon began to take shape, from a nebulous cloud of CO2 into a tangible, tradable contract, the trickle-down effect resulted in firms instituting financial infrastructure and corporate accountability to address environmental accountability. The finance ministries of not only the EU, but of Asia, Africa, and North and South American countries perked up their ears and opened their treasuries to a new
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commodity, rumoured to overtake even the $3-trillion oil industry in the not so distant future. With an infant market mechanism in place, the challenge remained to secure funding, R&D, advocates and global leaders for this emerging asset. (To note, investment bank Merrill Lynch and environmental research firm Trucost have launched an index based precisely on identifying global leaders. The index gauges companies by their carbon footprint and valuation, providing investors with exposure on a sector-neutral basis.) The focus turned to securing the perpetuity of carbon ad infinitum, despite its recognised existence as a policy-created phenomenon. How would this government-contrived commodity be rescued from collapse after 2012, when Kyoto’s first commitment period came to an end? The answer came quickly. By instituting the groundwork of the infrastructure in a global blueprint for an internationally transacted asset, the first movers in the market, namely the financial players, are supporting its longevity with the blessing of environmental NGOs and governments. At the same time, carbon presented the first opportunity to invest in an asset not priced in dollars. Carbon is currency independent, a global asset priced in its host country, and not subject to the whims and fancies of currency fluctuations. It therefore became attractive to those who wanted to join the market without dollar exposure. With these appealing attributes, the securitisation, monetisation, commodification, that is, instrumentalisation of carbon can be seen as guaranteeing its own continuity through the creation of investment possibilities. Already valued at US$60-billion in 2007, the global carbon market is succeeding on the back of carbon capital – driven innovation which is seeing an outcropping of green-collar jobs (even on perceivably not so green individuals). Results, of course, must be shown and market-makers are enacting benchmarks to measure how successfully the policy-enabled problem is being addressed.
Global Leaders Perhaps not surprisingly, the institutions with a comparative advantage of capitalising on financial innovation in an emerging market took the lead. The early days of carbon saw the World Bank fostering
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its Carbon Finance Unit, which generated both carbon-reduction funding and projects. Similarly, the Dutch government pioneered both carbon-related policies and project methodologies. The experts from these early starters have in part dispersed to private enterprises, disseminating carbon-market knowledge to banks, governments and academia. The dispersion of human capital to focal points such as London instigated the framework of carbon finance seen therein. This meant that carbon came of age in London through the financial centres and, more broadly, the EU ETS. In the financial centres, banks took the lead in a land grab to secure clients and interest in their services. Emissions desks have emerged both to create and to capitalise on carbon instruments. Financial institutions centred in the EU but spreading to Asian and American markets are providing trading, brokerage and intermediation services for the EU Emissions Allowance (EUA), Verified Emissions Reduction (VER) and increasingly for the Certified Emissions Reduction (CER) markets. Within a span of just a few years, carbon markets burgeoned where previously no infrastructure had existed. New revenue streams opened from numerous channels—from greentech and cleantech to carbon venture capital and structured emission products. Futures, forwards, options and other derivative products appeared alongside indices, catastrophe bonds and other weather-dependent products. The inclusion of forestry in the CDM and the attractiveness to forest-rich developing countries again ignited related product development for firms seeking limited exposure to the nascent markets. To validate and verify the carbon credits, separate companies appeared for this sole reason; shortly thereafter, project portfolio screening and project rating were developed. Given that the market lacked transparency and liquidity, it necessitated independent firms and ratings agencies to lend confidence to investors and asset holders about the quality of their product. Carbon credit origination in the CER and VER markets emerged at specialist institutions as well as investment banks and funds, for the sourcing of credits from emission-reduction projects globally. Innovative structures for debt/equity CDM/Joint Implementation ( JI)/voluntary project financing surfaced. Commercialisation opportunities from the creation of value in carbon materialised. Emission-reduction projects verified by the
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CDM generated credits and revenues. This went beyond strictly speaking CER, VER and ERU transactions, but entailed a society-wide rush into energy-efficiency schemes and greener real estate. The grass did indeed appear greener on the other side investors found, as they began accepting stricter energy-efficiency codes and building structures while employing more carbon-friendly building materials. These buildings needed insurance against the potential damages from climate change, and guarantees that their measures to ‘greenify’ their own activities would not be in vain. The risk-management industry therefore saw a suite of instruments in the works—for reducing portfolio risk, and insuring and reinsuring clients against damages from climate change or non-delivery of credits—and naturally funds began to explore carbon as an alternate investment. Carbon became an additional means of hedging, and carbon value became a measurable part of cash flow. Looking back on 1997, it is difficult to imagine that the Kyoto negotiators would have envisaged the inflow of capital from the enormous demand the Protocol ushered in, nor the garnering of sustainability concerns and environmental responsibility that began to be felt from the highest policy-making levels down to individual behavioural decision-making. Along this vein, socially responsible investing caught the eye and the appetite of philanthropists and fund managers. With the aid of high sustainability and other ‘green’ indices, financial institutions could now appeal to previously uninterested clientele, by using climate change as a selling point. In order to advise both investors and financiers, financial-advice companies took root, envisaging yet another new sector in which to specialise. Consultants reaped the rewards of being in the market ahead of competitors; young boutique consultancies with carbon expertise took on corporate clients and governments unimaginable for early-stage companies in other sectors. Due diligence became part of companies’ repertoires, and where it was not possible in-house it was exported most often to foreign enterprises or international headquarters at the project site. Many of these services were soon internalised by utilities. Heavily affected power and energy companies developed their capacity in-house to save on costs as well as to create bespoke products for meeting emissions requirements (although the majority of abatement costs are passed down through higher energy costs to
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consumers). Indeed, today the European utilities are the biggest players in the carbon space, transacting more than any of the investment banks. This may come as no surprise: with the implications of regulation bearing down in 2012, the utilities have the most to lose from lagging on the learning curve.
International Collaboration in Instrumentalising Carbon The instrumentalisation of carbon has been a subset of the cooperation at the firm, government and international market level to coordinate and harmonise a seemingly incongruous commodity. The carbon markets began in a fragmented framework, where the EUmember states, the United States and Asia had established disparate emissions-reduction schematics. The establishment of the EU-wide emissions-trading scheme initiated the founding or development of similar schemes globally—New Zealand and Australia, India, North America and Japan, among others. To verify that one tonne of offset CO2 was the same in one scheme as the other meant the unification of standards, benchmarks and quality markers. Much work remains on this front, particularly as it is intended that there will eventually be trade between the schemes. As the asset becomes fungible across India’s Multi-Commodity Exchange to the Australian Carbon Pollution Reduction Scheme to the EU ETS to the emerging US federal scheme, carbon’s role will truly be identified as an efficient, imbedded financial instrument. On one level, the increasing scope and scale of exchanges for carbon assets is contributing quite seriously to its instrumentalisation. The very definition of instrumentalisation corresponds with a capacity for use across markets in unlimited structured forms. Though over-the-counter (OTC) transactions through traders and brokers have dominated carbon transactions (the make-up is about 70 to 30 per cent for OTC versus exchange-based transactions), this ratio is moving towards a more equal distribution. More than fifteen exchanges are trading carbon instruments today throughout the EU, Australasia, the United States and India, with additional exchanges already planned in Hong Kong, Korea, China and eventually Africa. Exchanges provide a trusted marketplace vital for liquidity, and are crucial to sending price signals often obfuscated by OTC transactions. In the medium term of three to five
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years, the global market will be likely to consolidate to further secure carbon’s role as a robust asset class, leaving one dominant exchange each in North America, Europe and Asia. Currently, the market is nevertheless highly fragmented, and poses a barrier for arbitrage opportunities. Most of the price indices existing on the back of exchanges target European carbon transactions—a major remit will be to extend this to the developing carbon markets outside of the EU. To secure the opportunities available in carbon’s instrumentalisation, harmonisation and international cooperation are essential. Rifts among the approaches to CER generation and selling remain for the largest CDM host countries, and these should be overcome to facilitate arbitrage, transparency and liquidity. On the one hand, capacity building is lacking along with shortages of human capital in the emerging carbon markets. On the other, policy discrepancies cannot be overcome by simply sending carbon experts to these locales; rather, senior government and corporate level negotiations in tandem will be required. India (second-largest host of CDM projects at 28 per cent), for example, advocates unilateralism on projects, banks the greater portion of generated CERs and hence is a hot spot for exchange-based trading in Asia. China, host of the most number of CDM projects (34 per cent) and recipient of the most carbon-based Foreign Direct Investment (FDI) strongly supports bilateral transactions, and with the level of government involvement, would not be an obvious choice for exchange-based trading. The rest of Asia faces supply constraints from a dearth of CDM projects, facing competition from Latin and South America. Access to information, clear price signals and integration of homogeneous independent risk measures will facilitate instrumentalisation, despite the market discrepancies. Gaining the support of the smaller emerging carbon markets is important in this process. Looking forward, one way to achieve this will be providing small project developers access to medium- and large-scale aggregators of carbon assets.
Progress and Looking Forward This chapter has thus far examined the progress behind carbon’s commoditisation and the opportunities afforded by the creation of CO2 into a financial instrument, as well as some of the challenges faced.
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Instrumentalisation began with the Kyoto Protocol, which acknowledged carbon as a commodity. The flexible mechanisms of Kyoto, specifically the EU ETS and CDM began to generate revenue streams which became billions of dollars worth of business in the global carbon markets. When the EU demonstrated the success of its ETS, more tradable products in innovative structures emerged, and exchanges proliferated east and west. As the CDM poses a comparative advantage for Asian exchanges, much of the focus has gravitated eastward. In the emerging markets that may be less affected by the financial crisis than developed markets, opportunities for extracting value from CO2 income streams are more readily available and securable. By capitalising on the precedents of the European experience and the ability to recognise carbon as a discrete, emerging financial instrument, these second movers can, in a sense, ascribe a bespoke structure to an untapped resource. Commercial applications most relevant to each region are therefore evolving on the back of the same underlying instrument. The developments of human capital alongside increased R&D, financial innovation and acceptance of carbon as an asset by global market – makers have all contributed to defining CO2 as an instrument beyond a tonne of carbon. Markets still remain fragmented. Risk management and quality controls are needed for successful continued development; the suite of products and services motivated by financial opportunities beyond carbon will burgeon. In light of the progress since Kyoto and despite the credit crunch, carbon can be expected to remain a robust investment, opening doors unforeseen just a few years ago. The instrumentalisation and, it can be argued, the institutionalisation of carbon into the corporate culture, civil-society awareness, government bursaries and international negotiating tables lend it staying power despite its conception as a policy-created asset. The commodification of CO 2 through policy has the added benefit of government commitment and international acceptance. The $60-billion in 2007’s carbon market and prospects for considerably greater sums means, brusquely, that too much money is being laid on the table to dispel the carbon market in 2012, or sweep it to the side during a global financial crisis.
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Continuing to create and secure these opportunities will not be easy; the transition to a carbon-constrained world is a long road. OTC transactions have helped shape carbon into an asset, but are not enough without exchange-guided price transparency and market efficiency. International collaboration in this sense—unifying markets and harmonising asset benchmarks—will be yet another grain of sand on the beach. Through the described progress, carbon’s role as a bone-fide commodity will ensure its longevity. This should be seen through the global deal expected by 2012.
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15
The Fund Manager’s Perspective Lisa Wade
As a fund manager I see the new carbon-constrained world as an opportunity. As has been well documented, the transition to a carbonconstrained world requires a considerable change in the way we do many things. This shift has been touted by some as the greatest economic opportunity of this century. This opportunity comes in the form of investing in the transition to a low-carbon economy and the new asset class of carbon. I believe there is about to be, and needs to be, an energy-technology revolution to set us on a more sustainable energy path; this provides a unique opportunity to achieve long-term wealth creation for investors while at the same time striving to contribute to an environmentally sustainable economy. Before I go on and describe the opportunities we see in more detail I would like to share a quote from Lord Nicholas Stern: ‘The ones who invest in energy saving technologies and renewable energies today will be the economic winners of tomorrow, inaction will be much more expensive in the long run than taking action now.’1 We believe these superior investment returns will eventuate because there will be a movement of global capital into this space underpinned by the following two key tailwinds. First, a global desire to reduce carbon emissions and correct a massive market failure by attaching a price to pollution. This will lead to the following:
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An increasing global trend of adoption by governments of mandated renewable-energy targets. As of September 2008, sixty-six countries around the world have mandated renewableenergy targets, and this number is growing fast. While the United States was slow to move, it has now committed to a 20 per cent target by 2020. The most important recent development was introduced with the election of Barack Obama as the United States’ 44th President and the passing of the American Recovery and Reinvestment Act on 13 February 2009. This will drive a far more concerted shift to climate change. The Obama government has committed to using the transition to a low-carbon economy as a cornerstone of United States’ economic-recovery plan. Companies working to provide energy-efficient services, renewable-energy solutions and energy technology will directly benefit from the range of climate-change and alternative-energy policies. These policies, which include making the United States a leader on climate change and creating jobs in the clean-energy field, will underpin much of the growth in the sector. Global mandates to reduce carbon emissions have lead to the development of various regulated carbon markets. For example, the Kyoto Protocol and resultant Certified Emission Reductions (CER) credits, that mandate European emissions allowances. The Australian government is introducing its Carbon Pollution Reduction Scheme that will regulate the emissions, causing tradable permits to be sold to companies that have to comply. Incentives to improve energy efficiency forced by the fact that carbon now has a price and rising energy costs. Putting a price on carbon, whether it is by paying for emissions or via taxes, offers incentives for creators of pollution to change their behaviours and become more energy efficient. This often requires investment in new energy-saving technologies. The need for the investment in clean technologies to reduce carbon.
The second driver of capital movements will be the rising cost of fossil fuels, including higher oil prices leading to greater incentives to look for alternative sources of fuel for both economic and energysecurity reasons. The world needs to move from a largely fossil fuel–based economy to an economy largely powered by renewable The Fund Manager’s Perspective
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energy sources. Governments and corporations must commit to clear strategies to reduce fossil-fuel dependence now. For example, in Britain 30 per cent of electricity-generation facilities will need to be replaced over the next twenty years. In addition, the rising costs will drive further energy-efficiency measures. As you can see these two themes are interrelated and as a result we will see unprecedented investment opportunities that will contribute to the reduction of global emissions; improvements in global energy efficiency; and renewable energy being at parity with competing sources of polluting energy in terms of price and base load yields. As a fund manager, I see that the above will lead to investments in the following areas: • •
Listed and unlisted global renewable, cleantech and energyefficiency companies; and Investment in carbon as an asset class and the evolving development of related markets.
Global Renewable Energy Stocks The listed equity universe of global renewable-energy stocks comprises upwards of 550 stocks with a market capitalisation of well over $500-billion. As an example, in 2007 a proxy index called the NEX index returned 57 per cent and had outperformed the global MSCI consistently over a three year period. To give some perspective, the investment universe in Australia is seventy-three names with a market cap of approximately $14-billion according to the ACT Australian Cleantech Index. In 2007–08, the arkx carbon fund has achieved returns of about 10 per cent, outperforming the MSCI global index by approximately 25 per cent. I believe that in the future there will be Australian stocks in this space with individual market capitalisations of $14-billion and beyond. The stocks in this investment universe are the ‘clean chips’ of tomorrow. Twenty years ago you probably couldn’t google google. I think some of our stocks will be the googles of tomorrow. Just to give you an idea of some of the data, here are some truly overwhelming facts. According to the International Energy Agency, end-use efficiency and a virtually CO2-free power sector can yield emissions stabilisation
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in 2050 at today’s atmospheric level. To get to this level, the total additional investment required amounts to US$45-trillion. In addition to this, a massive increase of energy-technology research, development and demonstration is needed in the coming fifteen years, in the order of US$10–100 billion per year. In addition to this, according to McKinsey & Co, we need to spend US$170-billion on energy efficiency to reduce energy demand to an acceptable level. The key sectors we focus on are as follows: • • • • • • • •
wind (renewable energy) solar (renewable energy) biofuels and biomass (renewable energy) other (hydro, geothermal, wave—all renewable energy) energy efficiency hydrogen and fuel cells power storage climate-change service providers
It has to be noted that investment in this area is essential if we are to reach our goals of reducing carbon in the atmosphere before the damage has gone too far. Investors will provide the capital to facilitate the growth of businesses with products and services that will deliver reductions in carbon-dioxide emissions. It is as essential as it will be profitable.
Carbon as an Asset Class I view carbon as a new asset class. According to Stern’s research, the value of low-carbon energy markets will be US$500-billion by 2050. I view this estimate to be conservative. In addition to this, carbon has a unique quality: it is an asset class that will experience scarcity as the world moves to reduce emissions. This will lead to rationing of carbon by governments and upwards pressure on price in the near future. I see two main ways to invest and participate in carbon as an asset class and investment opportunity: carbon credits and Clean Development Mechanism (CDM) projects. Growing at about 300 per cent, carbon-credit markets are the fastest growing commodities markets in the world. In 2007 they were worth about US$60-billion; in 2008 they grew 84 per cent to US$118billion. This could be a trillion-dollar market by 2030, according to an
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analysis of bills before the US Congress by New Carbon Finance research economists in October 2008. These markets are evolving rapidly; recent moves to standardise and rate carbon can be viewed as the key to future success in carbon markets. The institutional framework must be stabilised. The markets must continue to show the following characteristics: adequate market efficiency, liquidity, volatility, arbitrage opportunities, asset-pricing transparency, sophistication in information efficiency, and low transactions costs. The European Union Emissions Trading Scheme (EU ETS) is an EU-wide cap and trade emissions-trading system, which trades in ‘EU Allowances’ called Emission Reduction Units (EUAs). The new Australian federal government has announced plans to begin its own carbon-trading scheme by mid 2010. The Australian Stock Exchange has announced that before this scheme is introduced, it aims to open a local carbon exchange. It claims that this will ensure that a reliable domestic pricing mechanism is established. Some examples of different types of carbon credits currently traded internationally include Certified Emission Reductions (CERs) and Verified Emission Reductions (VERs). CERs are project-based and have undergone registration. CERs can be used for compliance with Kyoto Protocol obligations or to meet emissions caps under the EU ETS. VERs are carbon credits developed by carbon-offset providers which either cannot or have not been certified under either of the two project-based ‘flexible mechanisms’ of the Kyoto Protocol.
CDM Projects The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas–reduction commitment to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries. Credits generated in such projects can be sold to countries with Kyoto obligations they cannot meet. The UN estimates that demand for generating greenhouse gas– emission credits could reach US$100-billion by 2030. I believe that many opportunities in the developing carbon market will revolve around exporting Australian technologies to projects in developing countries. Projects can be assessed on their
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contribution to genuine carbon reduction by assessing additionality. More detailed discussion of projects is beyond the scope of this chapter. However in brief, arkx prefers renewable-energy projects because project returns can be made from both the utility aspect of the project and also from the generated carbon credits.
Conclusion By actually investing in the solutions of the future it is possible for investors to derive superior returns while at the same time contributing to a globally sustainable economy. At arkx we expect to consistently outperform traditional market indices by investing in the transition to the low-carbon economy. TOMORROW IS TODAY; the opportunities beyond carbon are unprecedented.
Notes 1
Nicholas Herbert Stern, The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge, England, 2006.
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16
Coming into View Environmental, Social and Governance Sustainability for Institutional Investors Frances Magill and Nicholas Taylor
Introduction Investment markets cause myopia: the institutional structure of the investment markets is such that many participants focus dangerously on harvesting short-term gains and managing immediate risks, while being guided by a narrow set of financial indicators. That’s precisely what most institutional investors are not supposed to be doing. Asset owners, such as superannuation funds, are established to marshal the combined retirement savings of a large number of people with a broad range of needs. For example, Statewide Superannuation Trust invests $2-billion on behalf of 170 000 South Australians who commonly have differing levels of income, risk appetites, time horizons due to, for instance, the amount of time to retirement, and so on. A similar set of demands drives the actions of every superannuation fund. But one thing is certain: of Australia’s eleven million or so superannuants, 43 per cent will not draw down their retirement savings for more than thirty years—they are longterm investors, with long-term interests.1 Thankfully, this disconnectedness is all about to change. Sadly,
it has taken the shock of a carbon-constrained world to alert the investment industry to a set of considerations that have evaded its view for some time: environmental, social and governance sustainability.2 In this chapter we discuss how an ‘interrelated web’ of risks and opportunities arising from climate change is compelling the investment industry to consider a broader range of factors over a longer time frame than has traditionally been the case—which, incidentally, is precisely what they should be doing.
A Simplified Taxonomy of the Investment Industry There is no single taxonomy that might accurately illustrate the operation of every institutional investor in the Australian market, since the degree to which a particular superannuation fund may delegate any number of its functions is highly individual. For instance, some superannuation funds possess significant, internal investment teams that formulate their investment strategies and monitor performance of their investments, whereas others outsource much of their investment decision-making to external consultants. In addition, the Australian market is punctuated by collective, owner-directed organisations such as the Australian Council of Super Investors (ACSI) and Regnan, which serve functional requirements for a number of superannuation funds around corporate governance and (increasingly) sustainability. So rather than illustrate the exact workings of the investment industry, with all of its nuances, our intention is to
Figure 1: The institutional structure of the Australian investment industry. Source: FINSIA, Is the Financial Services Industry Ready for Climate Change?, FINSIA and Griffith Business School, May 2008.
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provide a simplified taxonomy that emphasises the institutional structure of the market for those who may be unfamiliar with it. Superannuation funds safeguard and grow the retirement savings of millions of Australians by delegating a number of responsibilities to external providers and advisers. This commonly includes seeking the advice of an asset consultant on where and how to invest the total pool of assets of the superannuation fund in order to meet a predetermined liability or financial-return objective. Upon that advice, investment managers are generally employed to invest that capital in particular asset classes, assets or geographic markets, such as Australian companies or global listed property. Throughout this process, both the institutional investor and their advisers call upon the services of specialist information providers for investment and governance data, stockbroking reports, legal advice, and so forth. It is in part the competitive pressure to retain the services of institutional investors, such as superannuation funds, that drives much of the focus on short-term returns and investment strategies of the major participants we explained earlier. Superannuation funds play a central role in the institutional investment market, delegating to advisers, information providers and investment managers. Hence it is most likely that superannuation funds drive the acceptance of sustainable investment approaches in the investment industry through client-provider relationships, formal policies, dedicated sustainability meetings with providers and/or sustainability reporting requirements, investment manager mandates, and so on.3 As such, Statewide has made sustainability its core strategy to transform its business to the changing environment, so that it may continue to deliver high levels of services and returns to members who endure over time.4 As more and more superannuation funds recognise the materiality of environmental, social and governance sustainability, the investment managers and specialist service providers will be asked to build upon their ‘old’ way of thinking.
The Old View: Myopia Is in the ‘Best Interests’ of Members Historically, considering the environmental, social and governance sustainability of an investment has been disregarded by superannuation fund trustees as being a ‘values-based’ distraction from their
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fiduciary duty to act in the ‘best interests’ of their members. Trustees are further chastened by the fundamental principle of trust law that requires trustees to exercise their powers for a ‘proper purpose’, which in the context of the investment power, is clearly defined to be augmenting the value of the fund according to the requirements of its beneficiary members. With an absence of any explicit reference to environmental, social and governance sustainability in Australian investment trust law, the courts have repeatedly ruled against trustees who have made decisions based on ‘non-financial’ criteria.5 The burden of proof has been on demonstrating how sustainability may have a material impact on the value of an investment portfolio—an endeavour that is somewhat different from the prudence of sustainable business practices for individual firms, which is more widely accepted.6 Towards that aim, previous research effectively pushed-aside five ‘rocks in the road’ that are frequently cited as obstructing institutional investors from considering the environmental, social and governance sustainability of their investments.7 Adopting a metaanalytical approach to over thirty-five years of empirical studies, Taylor and Donald (2007) reasoned that sustainable investment approaches need not result in lower financial returns nor contradict the fiduciary duties of superannuation trustees, and that ultimately ‘the way is open for superannuation trustees to embrace a more positive approach to sustainable investing’. 8
The Paradigm Shift: Sustainability Is Coming into View The success of this ‘new’ thinking has been its grounding in economic rationality; environmental, social and governance sustainability factors help better identify and manage a broader range of risks and opportunities over a longer time frame. The consideration of sustainability factors should be seen as a complement to the current focus on short-term financial-evaluation criteria, not as a process that distracts or conflicts with it. Without question, the single issue of climate change, and in particular the pricing of carbon emissions, has resulted in a paradigm shift throughout the entire investment industry. Responding to scientific and public pressure towards climate change, there has been a
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recent spate of Australian broker and investment management research into the materiality of climate change and, in particular, carbon pricing.9 This development is further enlightening many investment professionals to the extent to which ‘extra-financial’ factors such as social and governance sustainability may impact investment performance. For instance, some argue up to 75 per cent of a company’s value is bound-up in ‘intangibles’ such as corporate governance, quality of management and reputation.10 At present, some of the most pressing investment issues relating to sustainability are as follows: • • •
Investment Environmental: carbon management, climatechange impacts, energy reliance and water sourcing. Investment Social: lending practices, human and labour rights, and human capital management. Investment Governance: materiality of supply chain management, board structure, executive remuneration and shareholder rights.
While this ‘new’ way of investment thinking is not yet enshrined in statute, successive governments and governmental bodies have made rather pointed public statements that broadly support sustainable investing approaches. For instance, in June 2006 a Joint Parliamentary Committee concluded that ‘In the committee’s view, consideration of social and environmental responsibility is in fact so far bound up in long-term financial success that a superannuation trustee would be closer to breaching the sole purpose test by ignoring corporate responsibility’.11 In July 2008, following a similar statement, Senator Nick Sherry, Minister for Superannuation and Corporate Law, left a gathering of institutional investors with little doubt as to the Labor Government’s view when he declared ‘The development of carbon pricing presents a stark example of how extra-financial factors, traditionally kept off balance sheet, can become real risks for business … and investors’.12 The recognition of environmental, social and governance sustainability by the investment industry is an important part of the overall strategy to combat climate change. With the Australian Government working towards the introduction of a national Carbon Pollution Reduction Scheme by 2010, a reconfiguration of the corporate and investment regulatory environment appears imminent; 194
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corporate environmental reporting is key to any national carbonpricing scheme, and the investment markets would heighten any schemes effectiveness by recognising sustainability drivers in their decision-making processes, as well as further influencing corporate strategy and competitiveness.13
The Far-Reaching Influence of Australian Superannuation Funds At $1.4-trillion, Australia’s institutional investment market is the fourth-largest in the world. Superannuation funds, such as Statewide Superannuation Trust, collectively marshal over $1.1-trillion, or around 75 per cent of that market. What’s more, this dominance of the Australian investment industry is all but ‘guaranteed’; the Reserve Bank of Australia estimates total superannuation assets to reach $2.5-trillion by 2015 as a result of the 9 per cent superannuation guaranteed contributions and forecasted positive investment returns (which can either erode or add to the total pool). Given the sheer quantum invested by superannuation funds, Senator Nick Sherry, who presides over the corporate and superannuation regulatory framework that will be integral to an effective Carbon Pollution Reduction Scheme, is of the view that ‘Super funds
Figure 2: An indicative asset allocation of Australian superannuation funds. Source: Chant West, Strategic Asset Allocation Survey: Balanced Fund, December 2007.
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have both the capacity and the occasion to exert direct and substantial influence over the operations of listed companies. This gives institutional investors the capacity to influence corporations’ approaches to corporate social responsibility including the management of non-financial risk’.14 However, superannuation funds do not just invest in or influence the behaviour of listed corporations such as Westpac, Telstra and BHP Billiton. As is illustrated in Figure 2, the average superannuation fund invests around 60 per cent of its capital in other assets such as listed and unlisted property, government and corporate bonds and infrastructure. Superannuation funds therefore have both significant weight of capital as well as a considerable breadth of influence.
A Carbon-Constrained Investment Industry: An Interrelated Web of Risks and Opportunities With a significant range of interests comes an ‘interrelated web’ of considerations. The diverse range of holdings of superannuation funds greatly extends the climate-related risks and opportunities open to it, as well as adding to the complexity and interrelationship between different assets over different time periods. For example, the construction of an airport that is funded from an institutional investor’s portfolio might harm the environment to the detriment of an agricultural investment today while boosting the profitability of another holding that relies on regional tourism tomorrow. Others take the argument further still, believing that by holding a broad cross-section of the entire economy for long periods, superannuation funds are essentially ‘universal owners’; susceptible to the financial performance of individual assets as well as the performance of the economy as a whole.15 Arguably no investment decisions are immune from the affects of climate change over the long-term. While the impact of climate change on companies’ bottom lines is most widely debated, physical assets such as property and infrastructure are significantly exposed to climate change–related risks and opportunities. For instance, the effective environmental management of property assets is becoming increasingly linked to long-term investment performance. Evidence suggests that superior environmental performance improves investment value and investment risk:
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•
•
Investment value: attracting and retaining key tenants and customers, preserving rent and capitalisation rates, and ensuring access to capital Investment risk: ensuring effective risk-management practices around building life cycles, energy efficiency and tenant churn.16
In addition, the exposure of institutional investors to property is unique. The risks associated with property assets not only include direct property investments, but also risk exposure to property through its reliance in the operation of almost all major businesses and facilities as well as listed property trusts in share portfolios. In order to demonstrate the complexity and interrelated nature of climate change to an institutional investor, we now briefly introduce five core risks.17 Regulatory Risk Despite the Australian Carbon Pollution Reduction Scheme now tabled to come into effect in 2010 for most industries (agriculture will be 2012), uncertainty remains over the precise features of the scheme, which are required to model the extent to which it may impact either investment value or risk. With a global framework following the Kyoto Protocol not scheduled for discussion until late-2009, it will be some time before investors may feel comfortable with the regulatory environment covering greenhouse-gas emissions. For instance, the national Carbon Pollution Reduction Scheme will negatively impact companies reliant on industrial processes involving unavoidably high levels of greenhouse emissions, such as cement production, as well as those that are energy intensive, such as steel production, but positively impact firms able to reduce their existing emissions through, prehaps, innovation and process improvements, and ‘green energy’ innovations through access to capital. Physical Risk Property and infrastructure investments are most susceptible to physical damage from extreme weather events. As noted above, an often forgotten exposure of nearly all businesses to property assets extends the issues relating to the ‘property sector’ to other sectors such as
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‘retail and consumer discretionary’ which rely on factories and outlets to manufacture and trade. Additional risks associated with food shortages, urbanisation and mass human migration further add to the complexity of physical risks to investors—especially in emerging markets. For instance, extreme weather events may negatively impact insurance companies, through an increased number and scale of claims, and infrastructure assets through a loss of value, but positively impact construction and engineering services companies, from new facilities and mitigation planning respectively. Litigation Risk In time, the legal and regulatory framework is expected to ensure individual companies (and directors) and physical assets are liable for managing and reporting on their environmental performance. Litigation against non-complying or miscreant ‘responsible’ entities is an imperative measure to increase investor confidence in any scheme, as well as to ensure compliance is rewarded. For instance, penalties associated with the National Greenhouse Emissions Reporting (NGERs) framework may negatively impact engineering service companies (compliance and training) and companies with complex emissions calculations (transportation and logistics firms), but positively impact environmental-reporting consultants (carbon baseline assessments) as well as lawyers and auditors (to fulfil regulatory and compliance requirements). Competitiveness Risk There is already significant peer and international competitiveness implications for firms with poorly designed and implemented environmental-management strategies to address climate-related risks. Any Australian-based standards and initiatives need to be constantly assessed against leading practice in order to retain competitive advantage and/or not unduly hinder local firms in competing with unconstrained imports or exploiting export markets. The key for firms using these initiatives is to measure environmental performance to ensure they remain well-placed internationally. For example, local firms who are unable to adequately adapt to a carbon-constrained world risk losing international competitiveness
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(automotive manufacturing) whereas it is the timing of any reduction scheme that is most imperative to other industries, such as agriculture. Reputational Risk Public perception and communication in regard to environmental performance is becoming a significant determinant of company value. Products and processes that negatively impact on the environment, in some instances accounting for only a fraction of the global problem, are coming under increased public pressure from consumer groups, NGOs and the media. To what extent that will translate into shareholder value relative to the other risks is as yet uncertain, although as with competitiveness risk, it only looks set to increase over the short-term. For instance, marketing claims of carbon neutrality might have short-term, short-lived benefits, whereas a carbon-management strategy that first seeks to minimise carbon emissions is likely to be more sustainable over the long-term. This summary is by no means exhaustive, as the risks and opportunities associated with climate change are diverse and numerous. Institutional investors, with significant interests across the entire economy and in various markets, are particularly exposed to an ‘interrelated web’ of costs and benefits. In our view, navigating this web serves the ‘best interests’ of members by proactively recognising the financial implications of economic activity over a broader range of factors and a longer time frame than traditional investment approaches. Thankfully, there is an increasing number of organisations to assist institutional investors looking to implement a sustainable investing approach.
Report on Progress The paradigm shift that we’ve been describing (and further predicting) might become more clearly evident by evaluating the investment industry’s progress in considering the materiality of environmental, social and governance sustainability of their investment decisions. To facilitate the mainstreaming of a ‘principles-based’ view of sustainable investing, a small number of civil society and nonprofit organisations have been established. Broadly speaking, these
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organisations fall into one of four categories: frameworks, information gathering, representation and engagement, and research and development. We now turn to profile some of the key organisations across each of these categories. Frameworks The United Nations Principles for Responsible Investment (UNPRI) represents signatories with over $16-trillion in assets that publicly recognise the materiality of sustainable investing approaches. As part of the UNPRI, signatories commit to implementing a series of six aspirational principles regarding the materiality of environmental, social and governance factors. Figure 3 illustrates the rapid acceptance of environmental, social and governance sustainability to the investment industry, as measured by the total assets working towards sustainable investing approaches via the UNPRI.
Figure 3: Signatories to the UN Principles (by assets and number). Source: UN Principles for Responsible Investment, http://www.unpri.org.
Information Gathering The Carbon Disclosure Project (CDP) requests information on the business risks and opportunities presented by climate change and greenhouse gas–emissions data from the largest 3000 listed companies around the world on behalf of institutional investors with more
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than $57-trillion in assets. Signatories are then able to access company-level data as part of their investment decision-making processes, and more general information is made publicly available. Other reporting frameworks include the Global Reporting Initiative (GRI) and the UN Global Compact as well as a number of sector, national and global indices. Representation and Engagement Organisations such as the Investor Group on Climate Change (Australia/New Zealand) and the Australian Council of Super Investors serve to extend the investment industry’s knowledge and engagement on environmental, social and corporate governance (ESG) sustainability. For instance, Statewide Superannuation Trust is a member of both the Investor Group of Climate Change (IGCC) and ACSI, and has a policy of actively contributing to the promotion of sustainable investing approaches, as well as industry submissions on issues pertinent to its investments such as the Garnaut Climate Change Review. Over time, various regional organisations have been established in order to represent and educate the market on sustainable investing and other extra-financial approaches. In Australia, the Responsible Investment Association of Australasia (RIAA)—to which Statewide Superannuation Trust is also a member—enables individual investors to compare the products of different investment managers and superannuation funds, offers education materials to individuals and financial advisers, and reports annually on the level of funds under management in sustainable investing approaches. Research and Development Other organisations and networks solely focus on uncovering the materiality of environmental, social and governance sustainability, so as to better formulate practical and regulatory solutions to assist their mainstreaming in the investment industry. Examples include the Network for Sustainable Financial Markets (NSFM) and the Enhanced Analytics Initiative (EAI), which has recently been folded into the UNPRI.
Conclusion: A Challenge to the Investment Industry Using previous research into the economic rationality of sustainable investing approaches, we have shown how a carbon-constrained
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world is resulting in a further-reaching paradigm shift within the investment industry in which the materiality of sustainability factors are ‘coming into view’. In sum, we argued that sustainable investment approaches, by recognising a broader range of factors over a longer time frame than has traditionally been the case, promise to better equip the investment industry to navigate the ‘interrelated web’ of risks and opportunities that are presented by climate change and other environmental, social and governance factors. Superannuation funds, perhaps more than any other group of investors, must exert their significant influence over the functionality of the investment markets, as well as the economy as a whole in order to ensure the sustainability of their investments. Quite commonly, the institutional structure of the investment markets means that superannuation funds, as the ‘owners’ of the capital within the system, will increasingly demand that their asset consultants, investment managers and specialist service providers are considering the materiality of environmental, social and governance sustainability of their investment decisions. Therein lies our challenge to the investment industry: for all participants, including the government and regulators, to foster an environment that encourages the mainstreaming of sustainable investing approaches through continued collaboration and engagement between every stakeholder within the institutional investment industry. We believe that if we effectively meet this challenge, that ‘sustainable’ investment markets and institutions will ultimately serve the ‘best interests’ of superannuation fund members, as well as play a central role in the overall strategy to combat climate change.
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Australian Prudential Regulation Authority Statistics, Annual Superannuation Bulletin, June 2007. Note that by investing according to economic rationality, ‘sustainable investing’ markedly differs from the values-based approach of either ‘ethical’ or ‘negatively-screened socially responsible’ investing. Australian Council of Super Investors, Environmental, Social and Governance Guidelines: A Guide for Superannuation Trustees to consider Environmental, Social and Governance Issues in Investing, November 2007. Frances Magill, ‘Vision for the Future’, speech to the Committee for Economic Development of Australia, June 2008.
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The term ‘non-financial’ is used here with some precision as it is in the language of detractors of sustainable investing approaches. Given our belief in the materiality of environmental, social and governance sustainability factors, we will use the term ‘extra-financial’ throughout the rest of the paper. Previous research by Nicholas Taylor and Scott Donald clearly distinguishes between ‘firm-level’ and ‘portfolio-level’ studies into the materiality of sustainable business practices and sustainable investing approaches, respectively. For a more detailed discussion, see Nicholas Taylor and Scott Donald, ‘Sustainable Investing: Marrying Sustainability Concerns with the Quest for Financial Returns for Superannuation Trustees’, Russell Research, August 2007; and, Scott Donald and Nicholas Taylor, ‘Does ‘Sustainable’ Investing Compromise the Obligations Owed by Superannuation Trustees?’, Australian Business Law Review, vol. 36, no. 1, February 2008. Taylor and Donald, ‘Sustainable Investing’. Given the recent development of sustainable investment approaches, the vast majority of studies cited by Taylor and Donald refer to ‘ethical’ or ‘negatively-screened socially responsible’ investment approaches—a point that we expect only downplays the prudence of sustainable investing approaches to the performance of an investment portfolio. Others take this point further, arguing that investors must consider the financial return on investment as well as the carbon emissions (environmental) and job creation (social) that is derived from those investments. See Pictet, The SRI Performance Paradox, May 2008. For instance, see AMP, Climate Change and Company Value: A Guide for Company Analysts, November 2005; Carbon Disclosure Project, Carbon Disclosure Project Report: Australia & New Zealand, IGCC, October 2007; Elaine Prior, Climate Change and the ASX100: An assessment of Risks and Opportunities, Citigroup Australia/NZ Equity Strategy, November 2006; IGCC, Goldman Sachs JBWere, and Monash Sustainability Enterprises, Potential Earnings Impacts from Climate Change: Steel Sector, IGCC, November 2007. AMP Capital Investors, SRI Managers Continue to Beat the Benchmark, AMP SRI Research, June 2006. Parliamentary Joint Committee on Corporations and Financial Services, Corporation Responsibility: Managing Risk and Creating Value, Commonwealth of Australia, June 2006. Nick Sherry, ‘Environmental, Social and Governance Issues’, address to the Goldman Sachs JBWere Superannuation Forum, Melbourne, 4 July 2008. For a discussion of the significant role that ‘external’ investment markets play in promoting competitive business practices, see Michael Porter, ‘Capital Disadvantage: America’s Failing Capital Investment System’, Harvard Business Review, September/October 1992. Sherry, ‘Environmental, Social and Governance Issues’. Bob Monks and Nell Minnow, Corporate Governance, Cambridge University Press, Boston, USA, 1995.
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16 Drapac, ‘Property and the UNPRI … the emerging frontier’, presentation given at the Conference of Major Super Funds, March 2008. 17 IGCC, A Climate for Change: A Trustee’s Guide to Understanding and Addressing Climate Risk, IGCC and Carbon Trust, October 2005.
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17
Riding Out along the Clean Energy Efficient Frontier Mark Schneider
The demand for electrical power is increasing all around the world. In the developed world we continually discover new applications for electrical power that soon become among the essentials of modern life. As powered devices become ubiquitous, our power boards are overflowing. Electric locks, phone chargers and power adapters proliferate. In the modern household, even the simple act of drawing the curtains becomes an activity that cannot be performed without the assistance of an electric motor. In the 1950s having a refrigerator was a luxury. Today every Australian home needs the temperature stability of a refrigerator for the entire house, as year-round a constant temperature must be maintained, regardless of external climatic conditions (and whether or not anyone is actually at home!). The resulting explosion in powerhungry air-conditioners provides the engine for growth in power consumption. And the simple fact that is often ignored in the excitement over the advances in electrical-vehicle technology is that these vehicles do need to be charged. This only serves to further increase the requirement for electrical power. Of course, the growth in demand for electrical power is even more dramatic in the developing world as the citizens of these
countries rush to close the gap that exists between their ownership of electrical devices and the level of ownership enjoyed by their counterparts in the developed world. Access to electrical power is the most efficient means of eradicating poverty: further fuel for growth in power demand. And how are we meeting this burgeoning demand for electrical power? By encouraging the construction of new power stations? No, instead we are placing constraints on the sources of electrical supply, constraints that will hamper existing suppliers, let alone hold back the construction of new ones! Now there are very sound reasons for the imposition of these constraints, such as carbon taxes and emissions controls. Indeed, there is little alternative for our regulators and legislators other than to impose just these kinds of constraints. Still, they are not helpful to the cause of meeting the gamboling demand for electricity. Growing demand and limited supply offer a unique set of circumstances. As we confront the challenge of growing demand for power, with existing sources of supply facing curtailment, an exciting set of opportunities are creating a perfect storm for investors. The only solution lies in new power-generation facilities that are cleaner. In particular, the requirement for renewable sources of power supply will be substantial. Ultimately these offer the only means of meeting the need for power without doing irreversible damage to our planet and its delicate ecosystems. In turn, the requirement for new clean and renewable energy supplies will create increased requirements for capital. Ever-tighter imbalances between supply and demand in a market for a non-storable and essential commodity with ever-higher production costs will underpin attractive returns on this capital. But where within the wide spaces of the clean-energy world do the best business opportunities lie? Precisely what are the business opportunities that stem from this perfect storm? In fact, the clean and renewable energy investment domain offers a wide range of opportunities right across the risk spectrum. At the very risky, hyper-speculative end lies the investment in new technologies. These investments offer a high return but, equally, exhibit a high probability of loss.
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Less extreme, but still speculative, is the investment in the earlystage development of projects that implement mature technologies. Wind turbines, for example, might be a mature technology, but the early stage of the development of a specific wind-farm project is still fraught with risk. A project may be stymied (and early-stage funds invested frittered away) as a result of failure to secure planning approvals, connection agreements or any of the other critical components that a project requires. Less risky again might be the investment in the construction of a project. Again the wind-farm example is illustrative. With the required contracts and approvals in place, construction may be a fairly predictable process, but there are still inherent risks of delay, defects, human error, poor workmanship and so on. Once a project is in operation, risks are substantially reduced, but then the scope for high returns is also similarly diminished. Of course, market risk may remain if projects are run as merchant plants, exposed to the vagaries of power prices. Or risks may be further mitigated through the hedging of power-market price risk. At the most conservative end of the spectrum, the risks associated with an investment may be commensurate with bonds. Products have been developed that offer the opportunity for a wind-farm investor to transfer even wind risk to a third party. This risk transfer does come at a price with a lower return expectation, the companion twin of lower risk. The concept of an ‘Efficient Frontier’ is well understood in investment. The principle is that for a given level of risk tolerance, there is a maximum expected return. The maximum expected return increases with the level of risk tolerance. The objective of an investor is to establish an investment that exhibits a level of risk that suits his or her own specific level of risk tolerance, but given that level of risk tolerance also provides an expected return as close to the Efficient Frontier as possible. For any investor, the optimal investment lies on the Efficient Frontier. The extent of the variety in clean-energy investment opportunities means that clean-energy investment actually offers its own Efficient Frontier. Whatever your level of risk tolerance (or your appetite for
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expected return) there is a clean-energy investment that is a match for you. Clean-energy investment is not a homogenous class of similar opportunities, but is rather a diverse set of disparate opportunities that create an investment universe of their own, an investment universe that offers something for everyone. But this is not the end of the story either. Traditionally ‘beta’ is taken as a measure of risk inherent in a given stock. Efficient Frontier analysis presumes that a high beta carries its reward in a higher return, while equally the converse applies. ‘Alpha’, on the other hand, is for many the holy grail of investment. Alpha is the out-performance that an investment may offer over-and-above the theoretical maximum expected return for its particular riskiness: its beta. Alpha is the sought after ‘excess return’. The truly exciting factor in clean-energy investment is that the sector offers the possibility of alpha in the form of the bonus that clean energy will inevitably attract as the only sustainable solution to the energy crunch. This is illustrated in the following chart that depicts a ‘Clean Energy Efficient Frontier’ offering higher returns (for any given level of risk) than the general efficient frontier.
Figure 1: Efficient Frontier of clean energy in comparison to standard investment.
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On this basis, clean energy offers a business opportunity for everyone. Determine your own level of risk tolerance, and then ride out along the special ‘Clean Energy Efficient Frontier’ to find the optimal investment. This is the unique and exciting investment opportunity that Clean Energy offers.
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Green Investing Towards a Clean Energy Infrastructure Chris Greenwood
Investors and policy-makers are facing an historic choice. At the very time when commentators are branding green investing as a luxury the world cannot afford, enormous investment in the world’s energy infrastructure is required in order to address the twin threats of energy insecurity and climate change. Waiting for economic recovery, rather than taking decisive action now, will make the future challenge far greater. As the cost of clean-energy technologies decreases and policy support is put in place, the shape of the eventual energy system is emerging. But the investment demand is substantial. Despite the recent turmoil, the world’s financial markets are up to the financing challenge, but they will need continued action from the world’s policy-makers and leading corporations. We do not rehearse the science of climate change in this paper. Suffice to say, the most recent data shows carbon and temperature trajectories tracking the pessimistic edge of the scenarios considered by the Intergovernmental Panel on Climate Change (IPCC), the scientific body set up to advise policy-makers. To have a chance of limiting the average increase in global temperatures to 2°C, a level that an increasing number of experts already considers unsafe, the IPCC
believes that we need to limit the concentration of greenhouse gases in the atmosphere to the equivalent of 450 parts per million of carbon dioxide by volume (450ppm CO2e) by 2030. This means reducing CO2 emissions by 60 per cent from baseline levels by 2030. Energy is responsible for approximately 60 per cent of the CO2 emitted into the atmosphere each year. If we are to limit greenhousegas emissions to a level consistent with 450ppm CO2e, a complete restructuring of our energy infrastructure is required over the coming few decades—the fuels we use, how we generate and distribute electricity, how we power our transportation, the way we heat and cool our homes and offices, and the way we run our factories. And we have to achieve this without jeopardising the global growth needed to pull the developing world out of poverty or destroying the accumulated capital formation that is needed to pay pensions and healthcare costs in the developed world. For the purpose of this paper we will consider only investment in clean energy (defined here as investment in renewable energy and energy-efficiency technology, but excluding nuclear power and large hydro)—although we accept that this forms only a subset of all ‘Green Investment’ opportunities.
The Scale of Investment Required The sums involved in a shift to a low-carbon energy system are daunting and there are varying views regarding the exact amount of investment necessary. The Stern Review talks of a cost of 1 per cent of global GDP to limit greenhouse gases to a concentration of 550ppm CO2e by 2050, equivalent to around US$500-billion a year currently (global GDP in 2007 was US$54-trillion), although the longer the delay in taking decisive action, the higher the cost of mitigation. The International Energy Agency’s World Energy Outlook (WEO) 2008 estimates around US$550-billion needs to be invested in renewable energy and energy efficiency alone each year between now and 2030 if we are to limit concentrations to 450ppm CO2e, while New Energy Finance’s Global Futures analysis points to an average annual investment of US$515-billion over an extended period (see Figure 1). The good news is that the process of transition and the associated surge in investment have already begun. Investment in clean energy—defined here as investment in renewable energy and
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Figure 1: Estimated Annual Investment to 2030, US$billions. Note: World Energy Outlook 2008 covers investment in renewable energy generation and energy efficiency, with an assumption that half the additional power investment required under the 550ppm and 450ppm scenarios is in renewable energy; McKinsey covers only energy-efficiency investment; New Energy Finance Global Futures covers investment in renewable energy and energy-efficiency technologies only. Source: New Energy Finance, based on material from International Energy Agency, World Energy Outlook 2008, November 2008, www.worldenergyoutlook.org/2008.asp; and McKinsey Global Institute, The Case for Investing in Energy Productivity, February 2008, www.mckinsey.com/mgi/publications/Investing_Energy_Productivity/index.asp
Figure 2: Total Global New Investment in Clean Energy, 2004–2008, US$billions. Note: Figures marked with an asterisk (*) are based on industry estimates from various sources; all others are extrapolated values based on disclosed deals from the New Energy Finance Industry Intelligence Database; figures are adjusted to remove double-counting. Source: New Energy Finance.
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energy-efficiency technology, but excluding nuclear power and large hydro—increased from US$33-billion to US$155-billion between 2004 and 2008 (see Figure 2), and now accounts for around 10 per cent of global energy infrastructure spending. In electricity generation, the rapid expansion of sustainable energy has been even more striking, with approximately 40 gigawatts of power-generation capacity added in 2008, about one quarter of the estimated total 160 gigawatts of power-generation capacity added worldwide.
Eight Emerging Large-Scale Clean Energy Sectors The surge in investment activity in clean energy over the last five years has spanned all sectors, all geographies and all asset classes. What has begun to emerge as a result is the overall shape of the new lowercarbon energy infrastructure. No one can describe with certainty what the world’s energy system will look like in 2050. A substantial proportion of our energy will undoubtedly still be supplied by fossil fuels, but we can now be fairly certain that a future low-carbon energy system will include a meaningful contribution from the following eight renewable-energy sources: 1 2 3 4 5 6 7 8
Onshore Wind Offshore Wind Solar Photovoltaic (PV) Solar Thermal Electricity Generation (STEG) Municipal Solid Waste-to-Energy (MSW) Sugar-based Ethanol Cellulosic and Next-Generation Biofuels Geothermal Power
Although these energy technologies—which constitute only a subset of the full range of opportunities—may not yet be fully cost competitive with fossil fuels, the economics of experience curves, and oil and gas depletion are working powerfully to level the playing field. Renewable-energy technologies are becoming cheaper as they reach scale and operating experience. This trend has been obscured recently by surging commodity prices and supply-chain bottlenecks, but with new industrial capacity coming online we are about to see prices drop as they come back in line with costs now that we are moving
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into a buyers’ market. Solar PV electricity costs may become comparable with daytime electricity prices in many sunny parts of the world in the next twelve to thirty-six months, even without subsidies. Wind is already cost competitive with natural gas–fired electricity generation in certain locations without subsidies. Renewable energy is not generally subject to risks associated with fuel input costs. Increasing fuel prices by 20 per cent increases the costs of generation by 16 per cent for gas and 6 per cent for coal while leaving renewable-energy technologies practically untouched. The volatility of fuel prices alone should act to encourage utilities to build some proportion of renewable energy into their portfolios. And higher capital costs for many renewable-energy technologies—and no fuel costs—mean that they will benefit more from reductions in effective interest rates than natural gas or coal. Indeed, in a world in which effective interest rates for energy projects drop 300 basis points, while fuel prices and carbon-credit prices each rise by 20 per cent, onshore wind becomes cheaper than natural gas, and geothermal and waste-to-energy not only beat natural gas, but are even cheaper than coal-based power. Nuclear power is also set for a renaissance in many countries around the world. Nuclear’s share of total electricity production has remained steady at around 16 per cent since the 1980s. Its contribution is clearly set to grow over the medium- to long-term, although it will always be limited by issues of cost, storage, safety and public resistance. We do not consider it in detail in this paper.
Key Enablers of a Shift to Clean Energy The shift to a low-carbon energy system cannot be achieved simply through the addition of new sources of renewable energy. It will also be necessary to make wholesale changes in the way energy is distributed, stored and consumed. Again, the outlines of these changes, and the investment opportunities implied, can already be seen. We focus here on four areas: 1
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Energy Efficiency: It has been frequently said that the cheapest source of energy is the energy never used. There are enormous opportunities for improving the efficiency of the world’s energy infrastructure, both on the supply side and the demand side—
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and many of them could even produce returns above the cost of capital of major businesses. In a recent report, the McKinsey Global Institute estimated that there are US$170-billion of energy-efficient investment opportunities that would produce an internal rate of return (IRR) of 17 per cent or more. Smart Grid: The world’s electricity grids were designed to distribute power cheaply and reliably from large, centralised, predictable power stations. The grid of the future will have to cope with decentralised, fluctuating supply. It will also be expected to deliver a far more sophisticated range of services to help with demand-side energy management. Only a new and fully digitally enabled grid architecture will be able to meet these needs, and the investment requirement is estimated by New Energy Finance at US$8.6-trillion (including US$6.8-trillion to repair and replace the existing transmission and distribution network). Energy Storage: The need for energy storage is increasing— whether to power hybrid electric vehicles, to smooth out fluctuations in supply and demand, or to extend appliance functionality. The cost of storing 1 megawatt hour of electricity ranges from US$50 to US$180, depending on the technology used. As power-storage prices come down, it can increasingly be used to smooth the supply of power or to bridge the gap between peak and night-time electricity rates. Improved power storage is also required by ever more advanced mobile appliances and ubiquitous communications. Carbon Capture and Storage: No discussion of the future energy infrastructure can be complete without considering Carbon Capture and Storage (CCS). Although there are no installations at scale yet, there are almost 200 projects at varying degrees of completion around the globe. With so many countries—including China and the Unites States—overwhelmingly dependent on coal for their electricity, CCS needs to form part of the solution if we are to restrict CO2e concentrations to 450ppm.
The Role of the Carbon Markets Although it may sometimes not seem to be the case, we are moving inexorably towards a world in which every major economy puts a price on greenhouse-gas emissions. Currently the most liquid markets
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are the European Union Emission Trading Scheme (EU ETS) and the global Kyoto compliance markets. Others are following in their footsteps including Australia, Japan, the US Regional Greenhouse Gas Initiative (RGGI), California and the Western Climate Alliance. Then there is the voluntary market, rapidly taking shape and increasing in volume. These may soon be joined by a US Federal carbon market and a strengthened global scheme may emerge from the negotiations in Copenhagen in 2009. What we are seeing is the emergence of a system of interlinked policy-led financial markets, similar to currency markets. A single price for carbon everywhere in the world is probably not achievable, but neither is it necessary. As each of these carbon markets grows in liquidity, its rules firm up and become well understood, and it is linked to other markets via project-based (and other) mechanisms, arbitrage will reveal a global carbon price range—and it will be one that drives significant behavioural change. Carbon prices alone, however, will not be high enough—at least for the next few decades—to prompt a large-scale roll-out of renewable energy, nor will they be sufficient to promote carbon capture and storage. Prices will be set, for many years to come, by cheaper sources of credit—energy efficiency and project-based mechanisms in the developing world. So a carbon price is an essential driver towards a lower carbon economy, but additional policy interventions will still be required.
Impact of the Current Financial Crisis The road to a sustainable energy future is not without its speed bumps. Although total investment volume in 2008 increased only marginally over 2007 to US$155-billion, it was supported by a very strong first half. By the final quarter of the year, the volume of clean-energy investment had dropped by over half from its peak at the end of 2007. Public market funding for clean-energy businesses has decreased significantly, with valuations down by nearly 70 per cent during the course of 2008. Venture capital and private equity investment held up reasonably well, but asset-based finance slowed markedly as the credit crunch ate into the availability of debt finance and the tax credits that have been driving the US wind boom.
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The short-term challenge for the world’s policy-makers is to maintain the extraordinary momentum of the clean-energy industry in these difficult times. To do so, they must use all the tools at their disposal. An enormous monetary stimulus has already been applied through the drop in global interest rates. On top of the monetary stimuli, policy-makers around the world are designing fiscal stimulus packages. As they do so, it is vital that every dollar should be made to multi-task: it should support shortterm consumption and jobs, as well as building the long-term productive capacity of the economy, and at the same time moving us forward towards key long-term goals such as a sustainable energy system. Developing renewable-energy technologies, rolling out a fully digital grid, properly insulating homes and offices, and educating a new generation of engineers, technicians and scientists should all be part of any fiscal stimulus program.
The Need for Smart Policy Even after the current crisis subsides, there will be a need for smart policy to support the shift to a clean-energy infrastructure. The industry needs a well-designed set of support mechanisms—one that is tailored to each geography, and to the technological maturity of each sector. Sectors nearing maturity and competitiveness with fossil fuels need rate support as they close the gap; technologies that work in the lab but are too risky to scale up need support and finance to bridge the ‘valley of death’; sectors with longer-term technological promise need research funds. Once policy-makers make incentives for clean energy a key element of their response to the current financial crisis, there will still be a need for further action. An entire ecosystem of supporting technology and service providers will be fundamental to the growth of a healthy clean-energy sector—and this is inextricably linked to the ability of entrepreneurs and companies to create new businesses. One of the reasons that Europe consistently lags behind the United States in clean-energy venture investment by a factor of five to seven is that the conditions for venture investment in Europe are less developed. Governments should also lead by example, creating markets for clean energy through public procurement. With central, regional and
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local government accounting for 35 to 45 per cent of economic activity in all of the world’s largest economies, public-sector purchasing can be a powerful force. Clean-energy use should be mandated in public procurement, which would create guaranteed markets for leading innovators in transport, heat and electricity. Finally, policy-makers should enforce energy-efficiency standards. Utilities and energy-intensive industries will respond to carbon prices and other price signals, but many individuals and businesses will simply not do so. As a result, there will always be a role for regulation to mandate certain changes in behaviour, such as appliance efficiency and standby power limits, corporate average fuel economy (CAFE) standards and building codes. They must also address the asymmetry between energy providers, who want their customers to use as much energy as possible, and consumers, who on the whole would prefer to use less. But whichever policies are adopted, the overarching requirement is for policy stability—the impact of policy uncertainty on cost of capital must be better understood—and simplicity, so that the industry is not burdened with unnecessary bureaucratic costs. Poorly designed, overlapping, intermittent, contradictory or overly-generous policies do more harm than good. Similarly, investors need to understand the scale and nature of the investment opportunity presented by the world’s one-time shift to low-carbon energy.
Conclusion The need to shift to a low-carbon economy is stronger than ever. Clean-energy technologies are becoming increasingly cost competitive with fossil-based energy. A carbon price will eventually level the playing field, but in the meantime clean-energy solutions require support from policy-makers. Policy-makers need to build frameworks that enable corporations and investors to make good returns by squeezing carbon out of the world’s economy. And investors need to understand the investment opportunity presented by the shift to low-carbon energy. The year 2009 is critical to bring these players together and start the transition toward a clean world-energy infrastructure. The official UN negotiations will work on developing the overall framework for a follow-on to the Kyoto Protocol by December 2009. To complement
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and support this process, a platform should be created that connects policy-makers (of the major economies in particular) with major investors and global energy corporations. A discussion, involving all these key players, can then take place during 2009 on how best to design the enablers identified in this report, in order to make the transition happen: a coalition of public–private expertise that designs the clean-energy motor to drive the new framework forward.
Notes Originally published in the World Economic Forum’s Green Investing report, presented to its Annual Meeting in January 2009.
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Part 5 National Opportunities
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ith all of this change and all of this opportunity, governments are attempting to position their countries to reap the greatest
benefits and to become world technology leaders. The strategies that will succeed are those that leverage off the natural competitive advantages that their countries possess. In November 2005, the UK’s Carbon Trust published a report that focused on what technologies the United Kingdom should pursue vigorously as the world transitioned to a low-carbon economy. Citing the examples of Japan’s leadership in solar PV and Denmark’s onshore wind dominance, the report concluded that with its high winds and extensive coastline, the United Kingdom could establish world-leading expertise in offshore wind. The policies that were implemented following this report are now reaping benefits as the first large-scale offshore wind farms come on line. This theory was taken further by the American author and Pulitzer Prize–winner Thomas Friedman, speaking on SBS’s Dateline program in October 2008: ‘All I know is that the country that leads is going to also be the dominant economic country. You cannot be big without being big in big things and the biggest thing is going to be energy technology.’1 In a more specific report released by Climate Solutions and CleanEdge in 2008, estimates were made on economic development and employment growth that would result from the north-west states of the United States becoming a leading region in clean technologies. The report Carbon-Free Prosperity 2025 forecasts that the region could
create between 41 000 and 63 000 direct jobs by 2025 in just the five clean sectors of solar-PV manufacturing, green building design services, wind-power development, sustainable bioenergy and smart grid technologies.2 Regions from California and Massachusetts to Shanghai, Singapore and Abu Dhabi are seeking to secure the investors and entrepreneurs that will be leaders in the low-carbon economy. The Climate Solutions report concluded that ‘building regional clean-tech clusters that steer toward a carbon-free future will be this century’s most competitive playing field’.3 This section considers the national opportunities within Australia and in collaboration with other countries. Australia is blessed with extensive natural resources when it comes to renewable energy. It has lots of wind, solar, wave and geothermal potential but which of these technologies should the country back to secure future prosperity for Australia while delivering the greatest benefit to the world? Should Australia take the lead in solar energy or can we harness all of these technologies and export power to our neighbours? Maybe we should seek to exploit the opportunities offered by our neighbours such as India? All of these concepts are considered in this section.
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Thomas Friedman, Dateline, television program, SBS, Sydney, 15 October 2008. Ron Pernick, Clint Wilder and Dexter Gauntlett, Carbon-Free Prosperity 2025, Climate Solutions and CleanEdge, 2008, http://www. climatesolutions.org/publications/CS_Executive_Summary_2008-10-29_. pdf. ibid.
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Building Australia as a Solar Nation The Hon Greg Hunt, MP
Introduction: The Climate Challenge—Big History Climate change is one of the fundamental issues of our time. It presents us with two major but achievable challenges. The first is to allow the poor of the world to develop and achieve the benefits of a modern economy while encouraging the continued improvement of health, freedom and prosperity in the already developed societies. The second is to progressively shift from a high-emissions to a lowemissions economy. Managing climate change will be one of the great challenges of the twenty-first century; it represents an important economic shift, and will require a portfolio of responses. In Australia’s case, we are moving towards the progressive pricing in of the cost of carbon into the way our economy operates. This is ‘big history’ in the making—perhaps the most significant economic decision in a generation. With such a profound change in the pipeline, we need to make sure we get our policy responses right. The Coalition has a plan that will protect the planet, protect Australia and produce a more ambitious target for emissions reduction at a relatively low cost to the economy. This approach to tackling climate change rests on Four Pillars:
1 A Green Carbon Initiative Australia has the capacity to abate 150 million tonnes of CO2 each year by utilising soil carbon, biochar (the conversion of biomass into charcoal), the re-vegetation of marginal agricultural land and other forms of land remediation. This could include an opt-in mechanism for farmers to receive carbon credits for soil carbon and other forms of green carbon, rather than a delayed but compulsory inclusion in the scheme. 2 A Clean Energy Revolution and Vision for a Solar Continent Australia needs a clean-energy revolution based on clean coal, geothermal and new sources of grid energy such as solar and tidal. This would include support for two clean-coal industrial-scale power plants by 2020 as well as support for measures leading to 50 million tonnes per annum of CO2 savings by 2020 from energy efficiency. It also includes plans for Australia to become a Solar Continent with measures to assist the solar industry and solar consumers move towards solar baseload energy as well as the development of other baseload clean-energy power such as wind, geothermal and tidal. 3 A Balanced and Careful Approach to Pricing Carbon A good emissions-trading scheme (ETS), as opposed to a flawed one, is just one tool in the climate-change toolbox. Importantly, it should create a level playing field for exporters and import-exposed businesses and not be rushed. It should also take account of action by major emitters such China, India and the United States, and protect clean-energy sources such as liquefied natural gas (LNG) and liquefied petroleum gas (LPG). 4 International Pressure In order to tackle climate change in any meaningful way, it is crucial that the world’s major emitters make real commitments to reducing their emissions. The Coalition’s response will include pressure on the major emitters to commit to real CO2 reductions and a commitment to lead the world in a Global Rainforest Recovery Program. In that context, I want to lay the foundations for our vision of developing Australia as a Solar Continent. Above all else, I am of the
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view that we need to approach the issue from a perspective of hope, not fear. The Challenge The Intergovernmental Panel on Climate Change (IPCC) report reaffirmed the link between human activity and increasing levels of carbon dioxide in the atmosphere. Global atmospheric concentrations of carbon dioxide for the last 650 000 years have had a natural range of between 180 and 300 parts per million. This increased to 379 parts per million in 2005, and is rising. By 2100 the average global temperature could increase between 1.8°C and 4°C from 1980–99 levels. By 2100 average global sea levels may rise between 18 and 59 centimetres. The IPCC found that the world has, on average, warmed 0.7ºC over the past century.1 This underscores clearly that we need to act to adapt to the impacts of global warming in coming years to reduce our exposure to the risks. We recognise that Australia is vulnerable to climate change. Irrespective of any climate effects, we occupy what is naturally the driest inhabited continent with a highly variable climate and great susceptibility to drought. Shifting rainfall patterns have profound environmental impacts and will, over time, change patterns of economic activity. Both the IPCC report and the Howard Government–commissioned Shergold Report found that climate change may result directly or indirectly in decreased water security in southern Australia, negative impacts on biodiversity—especially in the Alpine region and the Great Barrier Reef—and more frequent extreme weather events such as cyclones.2 However, the actions we take in Australia will not of themselves result in a sudden end to drought conditions over the Murray Darling. Nor will it prevent the bleaching of the Barrier Reef’s magnificent coral species. A global response is therefore fundamental to tackling the problems caused by climate change. And Australia should be part of that response. At the same time, we need to recognise that Australia’s natural resource and fossil fuel–energy endowments, and access to cheap energy, have helped underpin our economic growth and prosperity.
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We need to take domestic action to reduce our greenhouse-gas emissions to complement a global response, while not betraying the prosperity of current or future generations. So we need to act now and make a concerted and intensive commitment both domestically and internationally. The task is to encourage transition to a low-emissions future while pursuing continued modernisation in both the developed and developing worlds. The starting point for any response is to recognise that out of the total annual global emissions of 40 billion tonnes of CO2, Australia contributes 576 million tonnes of CO2 or 1.4 per cent. In short, we have an important role in Australia, but the solution must be global.
Protecting The Planet: Protecting Australia—The Coalition’s Four Pillars 1 A Green Carbon Initiative The Coalition’s Green Carbon Initiative will greatly broaden the number of tools at Australia’s disposal for tackling climate change. The initiative will create jobs and stimulate new business while preventing the exportation of our industries and emissions to overseas countries. Other benefits of the Green Carbon Initiative include substantial gains in terms of agricultural productivity, energy security and environmental quality. Focusing on three key areas, the plan will achieve additional annual reductions of at least 150 million tonnes of carbon-dioxide equivalent a year by 2020. The three key elements of the Green Carbon Initiative: • • •
Capturing and storing large quantities of carbon in soil and vegetation—biosequestration; Improving the energy efficiency of buildings, which account for 23 per cent of all greenhouse-gas emissions; Increasing investment in new technologies that directly tackle climate change, including technologies such as clean coal.
Huge reductions in carbon emissions can be achieved through better management of our agricultural land and by re-vegetating the landscape.
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Large quantities of carbon can also be safely stored in our soil through soil carbon and biochar, which has the added benefit of improving soil quality. The Garnaut Climate Change Review found that 70 per cent of Australia was arid or semi-arid land degraded by marginal grazing. Garnaut estimates that about 50 per cent of Australia’s 2006 CO2 emissions could be absorbed each year for the next twenty to fifty years by improved farming practices and re-vegetation.3 By comparison, we have been conservative in identifying 150 megatonnes of savings from soil carbon, biochar, re-vegetation and re-afforestation. Many energy efficiencies can be made at either no cost or minimal cost while measures that do cost will pay for themselves within a relatively short time frame. The Australian Sustainable Built Environment Council estimates that 27–31 per cent of existing emissions from buildings can be abated at zero net cost. It estimates that by 2030, an abatement of 60 megatonnes per year is achievable, which equates to about 11 per cent of Australia’s 2006 emissions. 2 A Clean Energy Revolution Importance of Renewables I have often spoken in the past about clean coal and gas and the urgent need to support the development of commercially viable clean coal and gas in Australia though adoption of a Clean Energy Target. The present policy approach will simply guarantee that we do not clean up our power stations. It is therefore deeply irresponsible of the government to neglect the development of Australian clean coal and gas technology by excluding any adoption mechanism. We will therefore continue to urge the government to change its position and support an adoption mechanism to bring forward the clean up of our coal and gas power stations. This is the single most important and practical way that we can significantly reduce our greenhouse-gas emissions. However clean coal and gas is not enough. We must, as a nation, make a greater commitment to renewable energy. Solar, wind, wave,
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tidal and geothermal energy have enormous potential to contribute to a low-emissions economy in Australia, if we can both protect our existing energy supplies by cleaning them up and add to new energy through renewable options. We are a hot, dry, sun-drenched country, surrounded by oceans. We could not be better placed to lead the world in the development and uptake of renewable energy. It is important to note here that we are already one of the world’s leading renewable-energy producers. The Mandatory Renewable Energy Target (MRET) introduced under the Coalition Government built on existing hydro schemes to bring forward additional renewable-energy projects with over 1000 megawatts of additional capacity and much more to come. Vision for a Solar Continent There is no country in the world better placed than Australia to benefit from the further development of solar power. Our geography, our people, our technology and our resources all make us a natural leader in solar technology, and the Coalition believes we should aim for nothing less than to create in Australia the world’s first Solar Continent. To achieve this vision of a Solar Continent, we need to advance on two major fronts. First, we must help meet our peak-load energy needs through the decentralisation of small-scale energy production. In short, when homes, schools and towns are able to produce peak-load energy through photovoltaic panels in times of high sunlight, we have a peak energy-production mechanism that is both distributed and at its most effective in times of peak energy need. Second, and on a more long-term time frame, we need to build on our initiatives to date and set an objective of leading the world in developing large-scale solar-power stations. That is why, for example, the previous Coalition Government invested $79.5-million to develop a solar concentrator in Mildura. Solar Homes Thanks to the Coalition Government, all Australians were provided with the incentive to install solar power in their homes with the provision of a rebate of up to $8000.
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Unfortunately this incentive has been removed and replaced with a new, extremely complicated rebate system centred on phantom renewable-energy credits. The net result of this new system is that the majority of Australians wishing to install solar power will now be $4000 to $4500 worse off than under the previous rebate scheme. We need to help our solar industry to grow, not penalise it. Photovoltaic panels offer an excellent means to provide zero-emissions energy during periods of peak power use. Solar panels have the dual benefit of both reducing emissions and reducing the need for new, high-emissions power stations to cope with increasing demand. We want to set Australia on a path to being a country where everyone willing to invest is within reach of running a solar home. Solar Feed-in Tariffs Another way in which we can help to support our solar industry is through consideration of solar feed-in tariffs. This is a scheme in which incentives are provided for people to feed solar energy back into the electricity grid. Providing a guaranteed rate of pay for solar electricity fed back into the grid will encourage the emergence of thousands of mini power generators around Australia, taking the pressure off the higher-emitting coal-fired power stations. In his article ‘German Sun Powers a Revolution’, Andrew McCathie reports that Germany has already used a renewable-energy tariff to increase solar-power uptake, and today is the world leader in solar-energy generation—even though the country is covered by heavy clouds for two-thirds of the year.4 Germany has over 40 000 people employed in photovoltaic-cell production and installation and is the number-one producer of PV cells in the world. To date, South Australia and Queensland have approved solarenergy feed-in tariffs, which guarantee 44 cents per kilowatt hour of solar energy. The Victorian government has also announced the introduction of a solar feed-in tariff and the ACT has passed legislation to introduce a solar feed-in tariff. However we should be aiming for more than a piecemeal approach. A national solar feed-in tariff could provide an immediate boost to domestic solar-power uptake.
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Solar Schools The Coalition also believes that every Australian school should use solar power wherever possible. This is not just to reduce emissions, but to teach our future generations about the value of responsible energy use, so as to better equip them for life in a carbon-constrained world. That’s why, when in government, the Coalition announced the Green Vouchers for Schools program, part of a $336-million program in which all Australian primary and secondary schools would receive funding of up to $50 000 to help install rainwater tanks and solar hotwater systems. Disappointingly, schools that were able to seek grants of up to $50 000 for water-saving projects under our program, can now only seek a maximum of $30 000. The Coalition is committed to further developing ways of working with schools to advance their solar-energy production. Perhaps more importantly, we aim to engage and help inspire the next generation of solar scientists and entrepreneurs. Solar Cities While in government, the Coalition established Australia’s first Solar Cities. Across Adelaide, Townsville, Blacktown, Alice Springs and Central Victoria, the Solar Cities program was designed to fully integrate energy efficiency into our communities, and included the following: • • • • •
3464 solar PV panels to be installed on private and public housing, and on commercial and iconic buildings; 4100 solar hot-water systems to be installed in private and public housing; 15 100 smart meters to give residential customers real-time information on energy use; 8450 energy-efficiency consultations to be conducted in households and businesses; and 71 500 energy-efficiency packs to be available for households and commercial customers to support their energy-efficient choice.
This has been a very positive program although it has been hampered by subsequent changes to the solar-panel rebate system.
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Solar Baseload If we are truly to create in Australia the world’s first Solar Continent, we will need to ensure that we develop solar baseload power. Much needs to be done on this front in relation to cost, reliability and storage of energy. I am, however, convinced that solar baseload can be developed to contribute to average daily base energy needs and, over time, energy-storage technology can be developed to allow full baseload operation derived from solar energy. The real challenge will be the time frame and the cost for bringing forward major solar baseload power stations. It is for this reason that the Coalition supported the Mildura Solar Concentrator. The 154-megawatt solar concentrator will be the largest, most efficient solar concentrator in the world. It will generate 270 000 megawatt hours each year, enough to power 45 000 homes, with zero emissions. It is estimated that the power plant will reduce greenhouse-gas emissions at fossil-fuel power stations by well over 400 000 tonnes per year. But more is needed. We will be building on our vision and support for the world’s biggest solar concentrator by developing a clear set of initiatives both for the development and the adoption of baseload solar technology. 3 An Emissions-Trading Scheme As a third pillar we propose a balanced and careful national carbon emissions–trading scheme that supports direct action rather than replaces it. There can be either a good or a bad system depending on the competency and sensitivity of the implementing government. A bad system can perversely damage the clean-energy sector while also punishing mums and dads with a petrol tax and a groceries tax. A decision to introduce an ETS should not be taken lightly and requires proper consultation and consideration by all Australians. We must work to preserve our environment—but we must guard against those who would act in such haste that they would export both Australian emissions and jobs overseas, particularly to countries with lower environmental standards.
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If we don’t get this right or rush to introduce emissions trading before we are ready, Australian jobs will go straight to Shanghai and emissions will go up globally. 4
International Pressure
Foundations of an International Response Perhaps the most important pillar of all—our foundation stone—must be an effective international approach to climate change, particularly in terms of mitigation. Australia has long aimed to limit greenhouse-gas emissions to 108 per cent of 1990 levels by 2008–12. We are tracking to meet this target—with emissions in 2005 being only 2.2 per cent above 1990 levels. Indeed, in 1990, emissions of CO2 or equivalent gases were 550 million tonnes while in both 2004 and 2005 they were 560 million tonnes and are now 576 million tonnes. The fact is we are doing better than almost all developed countries in meeting our international targets and, unlike many countries, we are meeting our goals on the basis of national actions alone. It is clear that the global response to climate change must involve all major emitters of greenhouse gases, avoid distortions of economic activity and emissions with no environmental benefits, and recognise different national circumstances. In Bali we endorsed the Bali Roadmap for a post–Kyoto Protocol well before the new government. We did so, however, based on the demand that there should be inclusion of incentives against deforestation and incentives for reforestation in developing countries. Against that background, the need for a more inclusive post2012 agreement is demonstrated by the addition of 800 new coalfired power stations in China and India over the coming five years. The combined emissions from these plants will be five times the total reductions in CO 2 mandated by the current international system. Equally damaging, the current international system has established a perverse incentive to literally slash and burn rainforests—which hold on average 900 tonnes of CO2 per hectare— and replace them with palm-oil plantations, which hold less than 300 tonnes of CO2 per hectare.
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Forests One key focus of our policy is deforestation. Globally, more than 4.4 million trees are lost to deforestation each day. Deforestation in developing countries is responsible for around 20 per cent of global greenhouse-gas emissions, or up to 8 billion tonnes of CO2 -equivalent gases per year. Halving deforestation could reduce annual emissions by up to 4 billion tonnes which is up to seven times Australia’s total annual emissions. That is why in March 2007 the Coalition Government launched the Global Initiative on Forests and Climate to support practical and immediate action to reduce global deforestation and promote reforestation. As part of the Initiative, we committed $200-million in new funding, of which $30-million was allocated to the Kalimantan Forests and Climate Partnership with Indonesia and private sector partners including BHP Billiton. The Partnership aims to preserve 70 000 hectares of peat-land forests in Indonesia’s Kalimantan region, re-flood 200 000 hectares of dried peat land, plant up to 100 million new trees on rehabilitated peat land for conservation purposes and cut emissions by 700 million tonnes over 30 years. Another $11.7-million of the Global Initiative on Forests and Climate funding was allocated to the World Bank’s new Forest Carbon Partnership Facility, with another $10-million to support efforts to reduce greenhouse-gas emissions from deforestation and promote sustainable forest management in Indonesia. This funding has the potential to remove up to 40 million tonnes of CO 2 from the atmosphere. As an alternative government, we believe that Australia must work for a post-2012 agreement that ends the perverse incentives for deforestation and includes all major emitters, be they developed or developing countries.
Conclusion Climate change is a long-term strategic issue for Australia, our region and the world and we need to work on both cleaning up our energy and adapting to any effects.
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Climate change has to be tackled on a variety of fronts, and the challenges it presents us with are diverse. Business and government must work together to ensure we create an effective, viable emissionstrading system. All Australians will have to make individual changes to adapt to the challenges of climate change. We need effective international action to reduce greenhouse-gas emissions and that action has to include all major players just as it must genuinely recognise differences in national circumstances. And we need domestic policies that support our overall goal. I believe that the only way forward is by an historic partnership between government, business and the community. This is ‘big history’ in the making, and we will be judged by future generations on how the government tackles this giant of an issue. As part of that big history, we have the potential to make Australia a Solar Continent with both peak and baseload energy capacity. Governments, business and the community must do whatever is necessary to ensure that this potential becomes a reality. Ultimately, we approach the challenge with hope rather than fear, commitment to protecting Australians against a bad system, commitment to a clean-energy revolution, a Green Carbon Initiative and a vision for Australia as a Solar Continent.
Notes This chapter is based on a keynote speech delivered to the Committee for Economic Development of Australia, Perth, March 2009. 1 S Solomon et al, ‘Summary for Policymakers’, in Climate Change 2007: The Physical Science Basis, IPCC, Cambridge University Press, Cambridge, United Kingdom and New York, USA, 2007. 2 ibid.; Peter Shergold, Shergold Report, Canberra, 2007. 3 Ross Garnaut, The Garnaut Climate Change Review: Final Report, Cambridge University Press, Melbourne, 2008. 4 Andrew McCathie, ‘German Sun Powers a Revolution’, The Age, 11 August 2007.
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Building Blocks for a Clean Future Kristin Alford
A focus on the opportunities beyond carbon reveals insight into our nature. For if we believe there are benefits, surely we are optimistic about our direction and its outcomes? But what direction do we hope for? What are some of our images of the future?
Scenario 1: Reduce Environmental Impact One future image is seen through the prism of sustainable living. The 2006 Living Planet Report from the World Wildlife Fund suggested a sustainability measure that included the Human Development Index (HDI) as an indicator of human wellbeing and the Ecological Footprint as a measure of the demand on the biosphere. In 2006, the only country that met the criteria for sustainable development was Cuba.1 The most recent estimation of HDI for Cuba was high at 0.855, a measure based on a long and healthy life, access to knowledge and a decent standard of living. The Ecological Footprint for Cuba was 1.8 global hectares per capita.2 Addressing Ecological Footprint is one facet of sustainability. Footprint can be minimised in a number of ways, typically by reducing consumption with regards to diet, housing and travel. Buy more local vegetables, walk or ride, repair and recycle: here is a sense of a return to simpler times and simpler pursuits when we had less
impact on the environment. Perhaps our future lies in the way people reinterpret the past.
Scenario 2: Dream, Create and Build An alternative is found in Dubai. From the tallest building in the world to the extravagant $30-million opening party of the Atlantis complex (a 113-acre resort on an artificial island off the coast), to the vistas of bitumen, glass and palms emerging in the desert; all signs of human ingenuity and technological know-how. The excitement created by architecture, business and entertainment is amplified by the audacity of vision. Here the future is constantly being created and renewed through the application of technologies. The most recent HDI for the United Arab Emirates was 0.903, yet in Ecological Footprint terms, the United Arab Emirates requires 9.5 global hectares per capita; in contrast to Cuba and clearly out of reach of global sustainability.
Can We Be Technologically Optimistic? The study of optimism and pessimism is important in futures thinking, and a recent study of two texts provides further guidance with respect to technology.3 Fred Polak studied Western civilisation over the past 5000 years and found that those civilisations with a shared, positive image of the future tended to thrive.4 His study uncovered a relationship between images of the future, and optimistic and pessimistic attitudes, which he further distinguished in terms of ‘essence’ and ‘influence’. The essence categories refer to an unchangeable course of events or ‘what must be’. Here the possibilities for the future are fixed and it is the tension of opposites—that of hope or despair. The influence categories refer to the possibility of human intervention or ‘what ought to be’. Here the role of people in changing or manipulating the course of the future is central. Sohail Inayatullah adds depth by considering the role of agency versus structure in the dynamic of social change.5 When the pendulum swings towards structure as the driver of change, this reflects a belief that society shapes the individual. Alternatively, agency indicates that the construction of many individuals’ choices shape society. Although there are subtle differences between structure and
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agency and Polak’s notion of influence, the question as to whether humans can create change is clearly present in both dichotomies. In thinking specifically about futures relating to science and technology, the alternative is that technology is a driver of change. This leads to an important choice in considering a framework for perspectives: whether people or technologies are the drivers of change. Here we can see tension between the capability to act and effect change versus the idea of surrendering to a more powerful technological force. The second consideration we can draw from Polak is whether people have ‘essence optimism’ or ‘essence pessimism’. Again, to recast in terms of perspectives on science and technology, the consideration becomes whether people are optimistic about the future benefits of technology and see hope for positive intervention, or whether they hold the dystopian images where technology is seen as likely to fail and people are pessimistic and wary of future risks. In this view, technology either brings hope or despair. These two considerations are captured in the quadrant diagnostic developed as shown.
Figure 1: Diagnostic quadrant for future images of science and technology.
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Our two scenarios are placed at quite different positions within the diagnostic quadrant. While each of these images is true, neither is helpful for creating an integrated and wise world that brings together the best of humanity, nature and technology. So, is there a technology that might be more integrated and in harmony with both technological advances and community sustainability? Can we find another approach, one that introduces technology in a way does not consume large quantities of resources?
The Opportunity of Nanotechnology Nanotechnology is the manipulation and control of materials at the nanoscale, making use of the novel properties that arise at this scale. Nanotechnology offers the unexpected, the unusual and the seemingly impossible. Gold is red, magnets are liquid and carbon is stronger than steel. To deliver nanotechnologies, an understanding of the fundamental behaviour of materials is required; nanoscience addresses the very nature of how things work. The field of nanoscience intersects with biomimicry, a discipline that imitates the designs and processes found within nature to solve human issues. While biomimicry can occur at any scale, much of nature’s processes occur at the nanoscale. The butterfly is an example. The colours on butterfly wings can be created either via pigments or via nanostructures on the scales that ensure that light is distributed to produce spectacular optical effects. It may be possible to apply these nanostructures to create similar effects in paint, cosmetics and other materials, minimising the use of dyes. The structure of the butterfly wing has also been used to inspire new thinking about solar energy. A novel structure for dye-sensitised solar cells that was inspired by the scales on butterfly wings was found to absorb light more efficiently than conventional cells.6 The dye-sensitised solar cell, originally developed by Michael Graetzel in 1991, was also originally inspired by biomimicry, in particular the process of photosynthesis. The dye-sensitised solar cell was conceived as a solar cell with low embodied energy, manufactured using low temperatures, and environmentally benign and plentiful raw materials. Thus it is a solar cell that can be scaled up without the downside of increased greenhouse-gas production during
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its manufacture. Australian company Dyesol is developing coatings that can be applied to roofing and glazing materials to enable widespread adoption of building integrated solar photovoltaics. Another Australian development using biomimicry and nanoscience is the Whisson windmill. This vertical windmill harnesses the wind to power refrigeration units that condense water out of the air. The secret is clever design and nanoengineered surfaces inspired by the African Stenocara beetle. To attain water, the beetle emerges from the sand, does a headstand and sits there most of the day while a little droplet of condensed water forms on the hydrophobic skin of its belly then rolls down into its mouth. Surfaces within the Whisson windmill have been designed to mimic the Stenocara’s underbelly so that any condensed water beads roll straight off. Other nanotechnologies inspired by biomimicry include selfassembling coatings that grow out of a solution the way seashells do in sea water.7 The resulting nanocomposite provides materials that are strong, hard and tough, or, inspired by the spider web, strong carbon nanotube yarns like those developed at the CSIRO. As our nanotechnology and biotechnology capabilities improve, it may become easier to ‘grow’ materials rather than manufacture or build. In addition to biomimicry, nanotechnology delivers properties that lend themselves to more sustainable solutions by providing novel approaches, flexible outcomes and targeted action. Flexible materials and products mean there are implications for infrastructure. Nanotechnology means things can be made smaller and in more flexible ways. Applying dye-sensitised solar cell to bricks provides a multi-functional building surface, reducing the materials required for construction and also potentially reducing the reliance on expensive energy infrastructure, perhaps also reducing the measure of Ecological Footprint. This reduction in the materials required is found in other processes and products. A micro-battery made from nanoporous materials can be made from liquid crystal templates to produce highly effective and safe batteries for electronic equipment like cell phones and cameras.8 Such a battery would provide longer battery life than is currently available to electronic products. The production facility would require just a room and perhaps $200 000 investment.
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Nanotechnology is also a precise technology. At the University of Melbourne, Professor Frank Caruso and his team have been developing a polymer-based capsule to direct treatment to cancer cells. The capsule is biocompatible and biodegradable. Antibodies on the surface of the capsule mean that only the tumour is targeted instead of the whole body, maximising efficiency and minimising harm. While this is an example of precision in medicine, the same principles apply for the environment. An example of precision in water management is the Aquasens, a sensor technology developed for the detection of phosphate and nitrate in environmental waters. Aquasens utilises a portable, nanostructured probe, based on an enzymatic reaction. The probe is sensitive, selective and measurements can be taken in real time at low cost. Aquasens can also be used for the rapid detection of sulphite in the food and wine industry. The Aquasens technology is one piece of intellectual property in a new joint venture, CleanFutures. This has been formed by NanoVentures Australia (NVA), Australian CleanTech and Bridge8, with the goal of successfully commercialising nanotechnologies that enable clean futures. By combining the IP, technology transfer and commercialisation project-management skills of NVA (and its predecessor Nanotechnology Victoria), with the clean technology and investment market knowledge of Australian CleanTech, and the government networks and marketing capability of Bridge8, CleanFutures plans to establish the template for the commercialisation of enabling nano and clean technologies. CleanFutures also has access to a water-treatment product Oxipure for the rapid removal of contaminants including arsenic, phosphate and silicate from industrial and environmental waters. Oxipure is based on an iron-oxide material in a stable hematite structure. As the structure is mesoporous, it achieves a capacity for adsorption three times greater than comparable technologies. The manufacturing cost of the iron-oxide material is also low, due to the use of low-cost raw materials and low-temperature processing. The unusual properties of carbon nanotubes have also been investigated for CleanFutures to apply in the development of new high-performance nanocomposite materials for wind-turbine materials. Nanoparticle-based composites are already being used in new
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automobiles developed in the United States and Europe, and they provide an advantage to wind-turbine power by enabling stronger, lighter and longer blades. These examples point to the possibilities of using nanotechnologies as enablers for future sustainable solutions and applications. But what it fundamentally means is that when you get down to this scale, you get insights into how the world might work, how the laws of nature fit together and when the laws of nature might change. This is not to deny the risks, because a better understanding of how things work includes a better understanding of risks to avoid and manage. Nanotechnology provides us with tools for technologies that mimic nature and the technologies that require fewer resources. Government and private investment in nanotechnology has been variable. However, where Australia has articulated a vision and supported the development of nanotechnology research, commercialisation and entrepreneurship, there have been dividends. Nanotechnology offers solutions to the some of the issues we face beyond carbon and the sector needs further investment and energy to build on past success. Investing in nanotechnology provides an opportunity for Australia to demonstrate leadership in a post–climate change society. Investing in nanotechnology reveals a possible sustainable future that maintains Australia’s high human development measures while reducing its ecological footprint. Can we share a dream, create and build in a way that reduces environmental impact? Can we use technology for a clean and positive future? The closer we get to understanding how the world might work, the more opportunities will present for making things work better. So yes, we have reason to be both optimistic about the path for opportunities beyond carbon and the role of both people and technology in driving change. Emerging technologies like nanotechnologies provide a practical path to that hope.
Notes 1 2 3
Chris Hails (ed.), Living Planet Report 2006, World Wildlife Fund International, Switzerland, 2006. ibid. Kristin Alford, ‘Through a Scanner Smartly: Perspectives on Science & Technology in Futures Studies’, Masters of Management (Strategic Foresight) minor thesis, Swinburne University, Melbourne, 2008.
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4 5 6 7
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Fred Polak, The Image of the Future, trans. Elise Boulding, Sythoff, Leyden, Netherlands, 1961. Sohail Inayatullah, ‘Macrohistory and Futures Studies’, Futures, vol. 30, no. 5, 1998, pp. 381–94. Wang Zhang et al, ‘Novel Photoanode Structure Templated from Butterfly Wing Scales’, Chemistry of Materials, vol. 21, no. 1, 2009, pp. 33–40. Alan Sellinger et al, ‘Continuous Self-Assembly of Organic–Inorganic Nanocomposite Coatings that Mimic Nacre’, Nature, vol. 394, 1998, pp. 256–60. Robert Mehalso, ‘A New Class of Nanomaterials Brings Power to the People’, paper presented at COMS2008, Puerto Vallarta, Mexico, 5 August 2008.
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Things Aren’t Always What They Seem Jumping Hurdles to a Post-Carbon Lifestyle Tony Cutcliffe
Contrary to much popular mythology, King Canute did not believe he could turn back the tide. He issued his empty command to demonstrate the limited capacity of mortal leaders to change the world around them. Similarly, Ned Ludd’s legacy has been devalued over the years. The term ‘Luddite’ is now used to disparage any person who is seen to question the received wisdom of the times. In fact, Ludd was actually less opposed to progress than he was to the unanswered questions of social welfare, which were wrought by the advent of the Industrial Revolution. While 800 years of history separated these two characters, their reactions make perfect bookends for the flux that is currently being generated by the unfolding threats of global warming. There is much that the Australian polity can learn from them. While a few hardy recalcitrants continue to reject the science of global warming, the plethora of opinion polls and research show that the danger is recognised by the majority of Australians as real and urgent. Likewise, the evidence shows that Australians want their government to act and to act decisively in the full knowledge that
transition will involve new costs and significant uncertainty. There is nothing uncertain about the danger of global warming however, and Australians are ready to move from ‘settler’ to ‘explorer’ mode for their own future good. Those who are not part of this majority are not necessarily agents of the status quo. The hesitation for many stems from the unknown ramifications of actions they are being asked to endorse. For many it is simply easier to ignore the experts’ self-indulgent gobbledygook rather than trying to decipher it. Like Ned Ludd they want to know exactly what they’re dealing with and how their actions might affect their own kith and kin. The dilemma for Australian government lies in the contradictory nature of the demands that are now being placed upon them. Without exception, Australian state, territory and federal governments have been elected on the great economic promise of aiding full and immediate consumerist satisfaction. Want a house the size of a hotel? You got it. Want two big gas guzzlers in the garage? Why not? Want a giant flat-screen TV in every bedroom? Go for it! Governments have fanned a concept of national identity built entirely on notions of economic success and personal status measured by material acquisition. It is a theatre designed by vendors in which we are merely players. In Australia, this prosperity has its roots and stability entrenched in unbridled consumption of cheap energy provided by fossil fuels. In an era of unfettered populism, governments have created wholly unsustainable expectations upon which their houses of cards rely. At the same time, governments have galvanised their electoral support by adopting the high moral ground on global warming. While condemning the transparent conservatism of their opponents, present governments have adopted a rhetoric that projects an emphatic determination to wrestle the carbon-emissions genie into submission. The high symbolism of ratifying Kyoto was seen to quell the electorate’s political bloodlust, even though in practical terms Australia’s commitments were no further advanced. So-called intellectual voters were happy to be lulled by the imagery of it all and have failed to question the incongruity of the Realpolitik. In other words it has suited them to believe that they can have their cake and eat it too.
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The unhappy consequence for Australia is government by greenwash. This sees political leaders of all major persuasions uttering platitudes of deep concern for the environment while promoting little more than marginal change around the edges of a profound and certain crisis. Much to his chagrin, the Australian Prime Minister’s followers are likely to be named in his honour. Worse than Luddites, we now have ‘Ruddites’. This impasse creates a hotbed of surreptitious influence that the public might sense but cannot put a name to. The vested interests associated with Australia’s fossil-fuel energy industry have been shameless in their fear-mongering about economic chaos that will be wrought by comprehensive reductions in carbon emissions. This has been a response that they have fermented for decades while actively sweeping the known threats under the carpet. Consequently, the political landscape has become littered with oxymorons such as ‘clean coal’ and ‘green cars’ and ‘future-proofing’. Even the devastation of water supplies has not served to illustrate the threat of global warming, instead it has urged radically carbon-intensive solutions such as desalination. Australia’s single-minded determination to bury its carbon using geosequestration will create toxic cesspits for future generations to live with. Even the United States gave this idea away. The legacies of the fossil-fuel economy are irrevocably entrenched in a nineteenth-century geopolitical worldview and they defy the irresistible dynamics of change that are evident in all other fields of endeavour. Yet our governments remain determined to protect and preserve them in isolation of progress in every other dimension of our lives. Consider, for example, the changes to health care, with enormous emphasis now being placed on preventative systems instead of reactive care. Doctor shortages and medical costs are seeing the advent of long-distance telemedicine; new technology promises nanoscopic robots to roam the blood stream, and cell technology will eventually grow replacement body parts. In executive education, enormous emphasis is now being placed on neuroscience and psychology so that key decision-makers develop a proficient understanding of their own and others’ behavioural pathology. Reflect for a moment on the sweeping changes created by communications advances since the IT revolution of the 1990s.
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What progress have we forfeited in every other dimension of our lives by remaining hostage to these fossil fools? The influence of the fossil-fuel lobby is directly linked to the human tendency to stick with what we know. There is no argument that the human neurology will defer to personal experience and emotion when given the slightest opportunity to do so. No matter how compelling the evidence of reality it will carry no weight whatsoever if influential forces manipulate reversion to the known ground of personal experience. Key decision-makers will not even realise that they are being manipulated with the trusty combinations of fear, flattery and flummox. Protection of the current wealth and hegemony of nations, organisations and individuals has become the single most influential consideration in our approach to the dangers of global warming. Much of this lore goes uncontested at anything more than a superficial level. The political scene has become infested with green NGOs which, for the most part, rely on a political symbiosis with the progenitors of the present crisis. Many rely on government or commercial funds and patronage for their work, or for the appearance of conducting the work they are ostensibly established to prosecute. While originally created as agents provocateur in a totally uneven public conversation, they have, in the main, become simple extensions of the apparatus of government. Many of the most prominent NGOs have become so-called ‘misery pimps’ living off the problem rather than its resolution. This grand and defective narrative has been grounded in the prosperity of Australia’s unprecedented resources boom that saw us exporting endless quantities of unimproved minerals from holes in the ground. Lulled by this boom, the Australian economy and political mindset submitted themselves to the ravages of the ‘resource curse’. The curse is usually the lot of corrupt third-world nations that live off the fat of the land while ignoring all other responsibilities for development. The Australian economy must now reckon with the bust in its mineral markets caused by the financial and economic crises besetting the globe. Having tethered our prosperity to the mercurial global commodity markets, Australia’s economic base is overwhelmingly dependant on the whims of overseas price-makers. Common sense
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dictates that this failure is just a foretaste of the pain that will follow the collapse of our fossil-fuel energy systems when world carbon markets price our non-renewable generators out of contention. As usual, Australian governments seem determined to compartmentalise the challenges arising from the range of economic and ecological hurdles that confront us. There will be no resolving these crises until governments are prepared to accept, articulate and deal with the root cause which lies within the inefficient and excessive use of resources across the consumption spectrum. The Australia public has been left with no-one to trust. However, all is not lost. The present hiatus creates a golden opportunity to intimately involve Australians in a new and exhilarating conversation about the potential benefits of a prompt and decisive shift to a post-carbon economy. For example, some argue that Australia is such a tiny emitter in the global context that there is no point in reducing our carbon footprint. Ironically, this is precisely why Australia must act. When Chindia and the United States finally tackle carbon reductions, their momentum will create an economic tipping point in which Australia will otherwise have no equity. Australia risks dismissal as the regional hooligan unable to move beyond national adolescence. Our sense of superiority denies the technological sophistication being developed in China particularly because it suits the fossil-fuel lobby to paint our giant neighbour in the colours of brown delinquency. Australia has untold and untapped potential as a producer of baseload renewable energy, especially in view of the improved economy and efficiency of solar photovoltaic cells and parabolic technologies. Australia could be transformed into a net exporter of renewable energy embedded in the refining and primary manufacturing of the crude ores that we presently export with the dirt on. The great investors from the Silicon Valley IT era are now directing their money to renewable energy saying it will be the biggest industry investment opportunity in the twenty-first century. Yet Australia remains committed to fossil fuels just because they exist. This is as futile as approaching the Industrial Revolution by training a horse to sound like an engine. Australia missed out on the boom provided by the IT revolution and we are similarly positioned to miss the renewable-energy train.
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Still we remain oblivious to the blistering irony of our selfassessment as the ‘clever country’. Communities can be helped to understand that low carbon does not have to mean low amenity. For example, workers are entitled to smooth and efficient passage to their place of employment, but that doesn’t mean that they want to commute for three hours each day. Improved co-mingling of work and residential places could mean that many Australians could walk to work. Many Australians would be happy to save money and reduce stress by catching public transport, but not if their trains are overcrowded and unreliable, and their buses and trams move along at jogging speed. Many Australians would like to cycle to work if only the bike paths weren’t becoming as congested and dangerous as the major arterials. Absent the dominance of motor cars, many road reservations could be converted to residential and recreational development so that overstressed infrastructure could be leveraged rather than endlessly duplicated in dormitory suburbs. Much of the space devoted to vehicles could instead be allocated to localised solar-power generation. Much of the remediation must begin with the composition of Australian parliaments. The reduction in diversity of life and professional skills within Australian parliaments demands that we restore representation of the microcosms and wisdom of Australian communities. The encroachment of ambitious androids from the party machines comes at the expense of candidates who used to provide a valuable palette of community experience and occupational knowledge. For this reason, the public sector is prevented from sourcing the best and most effective innovation because the bureaucrats and their masters are no longer informed buyers. By succumbing to the pleas of industrial bottom feeders, Australian governments actually deprive themselves of the high-level intellectual and policy capital available from the private sector. Instead of encouraging conceptual exploration, governments suffocate creativity by imposing their own models conceived in a blend of isolation, ignorance and ego. Private-sector participation is consequently limited to rent-seeker projects such as tollways, tunnels and other tedious BOOT (build, own, operate, transfer) schemes. The national psyche is gagging on mediocrity.
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There is no doubt that redesigning economic, social and cultural institutions is a complex task that calls for flexibility, sensitivity and creative leadership. Ultimately this is an exercise that must be informed by behavioural change, but change within the public behaviour is not the issue. Australian business and consumers are notoriously early adopters and there is violent consensus among pollsters that Australians are rearing to deal with the challenge. The real difficulty lies in achieving behavioural change within Australian governments. Governments must learn to value and harvest the collective wisdom and cooperation of ordinary citizens so that diverse and complementary knowledge can be used to design and energise positive change. Success will also insist that sensible levels of power and responsibility be returned to Australian communities. Ironically, this demand comes at a time when Australian governments are more exclusionary and less accountable than ever before. Much of this accountability has been eroded under the guise of anti-terrorism and the electoral fatigue it has introduced. A new-energy future can show itself in improved productivity and higher levels of physical and mental wellbeing. It can produce lower demands on household budgets achieved through more effective community investment. Better and creative sharing of public facilities for sport, entertainment, learning and work will make the tax and household dollar go further. Improved community functionality will reduce demands on the health, justice and infrastructure budgets. Economic growth can be fuelled by better productivity, more profitable exports and a better balance of payments. We can improve the quality of human life and opportunity in lock-step with the reductions in carbon emissions. There are two missing ingredients that need to be established if Australia is to respond effectively and with sustainable prosperity to the global-warming challenge. First, we need to dispense with the notion that a comprehensive and urgent reduction in greenhouse gases is optional. The only option is whether Australia manages the transformation itself and in its own interests, or whether it has the transformation done to it by the irresistible forces of global externalities. Secondly, Australians need to be provided with sources of advice that they can believe and trust. This does not mean that Australians
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are looking for promises that transformation can be achieved without pain, duress or uncertainty. But Australians will reject change that emanates from the egocentricity of leaders who claim to offer solutions of messianic proportions. Most of these leaders won’t be around to assess the damage they threaten. For these missing ingredients to be found, the major players in the political, business and community fields will need to start behaving differently and better. Instead of participating in an endless power-driven conversation about who knows what and who knows best, real, quality leadership will demonstrate truthfulness about what we don’t know and how we might work together to deal with it. Many of our leading academics, for example, will need to change their behaviour radically. At present, an inordinate amount of debate involves academic leaders arguing loudly and splitting hairs about infinitesimal details of global warming. What they need to start doing instead, is to begin paying their audiences the compliment of presenting their knowledge in a way that is practical, accessible and real. While many academics can rightly profess to be fearless warriors in the contest for truth, the vast majority might be accused of simply generating heat and noise on the basis of established certainty. If academics want to re-establish legitimacy in the architecture of Australia’s future, they will need to cross the Rubicon, and openly and transparently explore forbidden and forbidding territory. Companies that make their money out of fossil fuels will also need to decide if they value their reputations in the long-term. As with tobacco companies, many fossil-fuel corporations might decide they care only about profits in which case they will continue their trickery. If, however, they want to be part of a sustainable and prosperous future they need to withdraw their empty threats such as closing down the power industry in the face of economic uncertainty. Attempts at commercial extortion will not stand up to the rights of sovereignty, nor will energy versions of ‘reds under the bed’ stand up to an increasingly educated electorate. If companies are as open about their opportunities as they are about threats they may find new and better futures built on goodwill rather than artifice. Innovation will need to be redefined. Creativity will need to offer entirely new lifestyle opportunities rather than simply reconfiguring activities within the current circumscription of work, life and
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achievement. Mental and physical wellbeing may need to replace the luxury four-wheel-drive as an indicator of social success. The essential driver for such thinking is to provide governments with confidence in considering policy alternatives that otherwise frighten them into submission. Central to this success is the provision of incentives to private organisations and investment houses to propose radical system-wide redesigns that currently remain stymied by narrow government specifications. For example, major private investment and design will be essential in shaping and financing solutions that incorporate energy, planning, transport and public facilities and amenities that rely on clever integration for success. The solution demands much bigger investments than governments can or should provide. This means that commercial profits should not be a barrier to change but should be intrinsic to it and carefully interwoven with measurable social good. This represents a substantial shift away from present invitations by government to invest in highly segmented infrastructure packages. The value of private-sector initiative and investment must be considered in much broader terms than the current settings that focus on extracting the best outcomes from deficit dynamics. Governments must give the general public greater credit for their capacity to understand, embrace and ‘permit’ solutions that are advanced well beyond governments’ own thinking. It should not be heresy to suggest that Australian communities might be smarter than their present governments. The attraction to economic growth does not need to be dispersed, indeed it must be developed. However, it must be growth that recognises that its parameters, and nature must be organised within the best interests of the biosphere. The biosphere will always continue no matter what. Whether we will be able to live within it is the critical dilemma. While the extent of the required change must not be diminished by euphemism, the positive opportunities for change must be used to encourage positive action rather than introduce fearrelated paralysis. People must be given access to a wide discussion that they can meaningfully relate to their own circumstances. The disappearance of the Arctic summer ice will have little immediate connection to Australian lives. However, the implications of global warming will have more dramatic effect if people understand that the
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value of their whole asset base could be threatened. The 52-square homes in the outer suburbs will become worthless shanties if the associated costs of transport, heating, cooling and water consumption become unbearable. The current public discussion has become far too sanitised to be productive for Australian purposes. The nature of the discussion is largely determined by governments and organisations that have a fixation on control even if they don’t know how to use it. If global warming was a typical enemy—one that we could see—then there would be no room for duplicity, intrigue or subterfuge in galvanising the public effort. In cases of real and conventional threat, Australians would be faced with unpalatable realities to which they would be capable of responding with the necessary creativity, goodwill and urgency. For Australians to bring out the best of their natures, they must be given access not just to the truth, but to the whole truth, in language designed to educate rather than disempower. This would allow Australians to accept an appropriate level of responsibility for their own futures. If the opportunities for informed discussion and shared consent remain withheld from Australians, we will relapse into our traditional xenophobic mindset where everyone is to blame but ourselves. The protective provisions of Fortress Australia are never far beneath our national consciousness, but they will be powerless, as they should be, when confronted with this global crisis. Rather than winding back on immigration as politicians have already proposed, we must learn to accommodate accelerated population growth arising from mass displacement in underdeveloped geographies. The test for Australia will not just rest on our capacity to redesign our economy and lifestyle. The real test will examine the nature of our society beneath the jingoism and self-congratulation, and will expose the shape of the globe that we are prepared to bequeath as our legacy. Australia has lived a blessed life in its postcolonial nationhood. Untested by encroachment on our territories or by civil war, terrorism or revolution, we have no first-hand experience of real hardship that other nations take in their stride. While this may be a recipe for social ecstasy, it has also been a cause for cultural and economic indolence. It has created an era where we are still unable to resolve the unfinished business of our own peoples and where we have failed to
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capitalise on our intellectual and creative capacity. Up until now we have been like pigs in the afternoon sun: fat, dumb and happy—and oblivious to the slaughterhouse just around the corner. All that is has now changed irrevocably and unconditionally. Australia’s response to global warming will show the world and ourselves exactly what we are made of. Let’s hope we like what we see.
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The Best Crisis We Ever Had! Stewart Taggart
Today, the oilfields of the Middle East power the world. Tomorrow it could be places like Australia, Tibet, Mongolia and Indonesia’s volcanoes. Climate change, carbon trading and new technologies are ushering in economic changes that could rival the emergence of Renaissance city-states, heliocentric theories and the discovery of the Americas in disruptively revamping—for the better—how global society operates. Climate change could be the best crisis we ever had. Dramatic change springs from crisis. The chaotic opening of the Berlin Wall heralded the end of communism. The hair-trigger Cuban missile crisis brought nuclear arms restraint. Rachel Carson’s 1960s pesticide warnings and Earth Day’s 1970s environmental marches set the stage for Al Gore’s inconvenient truths. Now, civil society pressures are ushering in credible carbon pricing. Finally, movement is overcoming inertia. That’s good news. Assuming functioning markets, the ghosts of Adam Smith and David Ricardo will rapidly revamp global capitalism through the wand of the marketplace and the benefits of international trade. The ‘mother of all markets’ is about to be born: renewable energy. Don’t worry. Be cautiously happy.
This chapter argues the world, and particularly Australia, has so much accessible, low-cost renewable energy that it may have no need for technological non-sequiturs such as ‘clean’ coal or ‘safe’ nuclear. Given proper political and economic reform, the world can end up a richer, cleaner, more socially inclusive place and reduce carbon emissions 80 to 90 per cent by mid-century. This will involve rainbow coalition changes that orthodox economists, neo-conservative geostrategists, Christian fundamentalists and the most ardent greenies can all embrace. That’s because solving climate change involves traditional Christian teaching, theories of mutual assured destruction, Manichean Machiavellianism and ‘Basic Economics 101’ rolled into one. What’s not to like? Over time, a world dominated by flat-price, inexhaustible renewable energy will be a world in which politicised energy supplies and regional religious differences no longer fray geopolitical stability. In this new world, a vastly simplified energy-plex will cease to be a global irritant. As a result, historian Francis Fukuyama’s theorised steady state global polis for which he coined the moniker ‘the end of history’ will be reflected by renewable energy’s ‘the end of energy’. In other words, energy will cease to occupy centre stage in human affairs. Just as the sun shines, we’ll take abundant energy as a given. It’ll be a nice change. This ‘new world order’ represents good news indeed for Australia. Changes over the next thirty years could make Australia a ‘clean energy superpower’. If we grasps the opportunity, we could enjoy vastly enhanced global geopolitical prestige and hugely expanded economic strength. This bright story starts with Australia’s geographic birthrights: unique geology; beach-perfect high-barometric-pressure weather systems; and southern front seat on the Southern Ocean’s ‘Roaring Forties’. Translated scientifically, this means huge resources in hotdry-rock geothermal energy, concentrating-solar-power and wind and wave energy. Each alone outstrip Australia’s coal and uranium resources many times over.
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Welcome to Australia: ‘Clean Energy Superpower’ The story starts with modern society centred on computers, televisions and air-conditioners. The flow of electronic gadgets to our homes and offices is unstoppable. It’s been this way since Thomas Edison invented the light bulb. It will continue long, long after we’re all dead. It’s this success of technological capitalism that’s created our current problem of excess carbon emissions, caused primarily by using coal for electricity and petroleum for transport fuels. Both are now threadbare. In coming years, 1960s- and 1970s-era coal-fired power plants around the world will need replacement as urgently as Cuba’s auto fleet. Similarly, the long time frames of developing oilfields means supply and demand have gotten out of whack. High oil prices and economic pain have been the result. The problem is that energy flexibility has been designed out of the status quo. These need to be designed back in. Badly. The good news is that we have a second chance to fix our energy systems. The first chance came during the two oil crises of 1970s. We blew it. Initially, supply embargoes and skyrocketing oil prices led to rationing and headlong investment into alternatives. But these stopped as fast as falling eyelids once the price-narcotic of falling perbarrel oil prices occurred in the late 1980s and 1990s. From that decade-long Lethean river trip emerged the ultimate demon spawn of energy frivolity: the sports utility vehicle (SUV). Today, the overall problem is worse and the stakes are higher. But we’re smarter. Efficiency gains already achieved in alternative energies ranging from geothermal to wind to solar to biomass mean they all stand tall now like Melbourne Cup competitors. It’s time to let them compete on level turf against that ageing nag called coal and that sullen, dangerous donkey called nuclear. In the 1960s, historian Donald Horne called Australia the ‘lucky country’. What was originally meant as a dig on Australia’s provincial politics is now used as a badge of pride to describe massive resource riches—particularly in the outback. Contained within that sunbaked, one-time neoproterozoic sea floor lies huge resources of solar and geothermal power—enough to power the world. The outback region between Port Augusta, South Australia and Roma, Queensland contains energy resources that rival anything in
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the Middle East. This thermal ‘fertile crescent’ holds enough subterranean heat energy to power Australia for 450 years. Even more amazingly, that same outback area holds solar resources that could— quite literally—power the world. Taken together, they represent a fund of sovereign wealth that could, with virtually no exaggeration, make the world ‘a better place’. To understand the scope of this gift, pictures can tell the story. Australia’s outback sunshine is some of the strongest in the world. Unimpeded by cloud or moisture, it beats down on the desiccated outback with some of the highest levels of ‘direct normal’ solar radiation in the world. For its part, the nation’s hot-dry-rock geothermal energy is mostly contained in the Cooper and Eromanga Basins. A rudimentary overlay shows they are both located in much the same place.
Figure 1: Australia’s Outback solar and geothermal resources are located in the same areas, creating potential economies of sale in their exploitation.
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The Centre for International Economics estimates there are sufficient geothermal-energy reserves beneath Australia to satisfy the nation’s current electricity needs for 450 years. CSIRO has said Australia’s 2020 electricity needs could be met in full by a mirror field a mere 50 kilometres square. Exploiting one or both of these resources means Australia’s future electricity needs could be satisfied by a ‘onestop’ shop. But the good news goes even further for solar power. If Australia could be powered by a square mirror field with each side measuring only 50 kilometres, China could be powered by an outback square mirror field with each side measuring 162 kilometres, the United States could be powered by a square mirror field with each side measuring 232 kilometres, and the entire world’s electricity demand could be met by a square mirror field with each side measuring
Figure 2: The sizes of hypothetical mirror fields and their potential to satisfy domestic, regional or world energy needs.
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432 kilometres. The entire world’s primary energy demand, a broader measure that includes electricity demand, transport fuels and all other human energy consumption down to camp fires and cow dung, could be satisfied by a square mirror field of 1230 kilometres per side. That’s a lot of power. The difficulty in making use of it is that even if the mirror fields and hot-dry-rock drill shafts were in place, Australia’s grid geography makes it hard to get that energy to market. The nation’s Eastern electricity-transmission grid was built with Old English mentalities, focused on seaboards and oriented to oceanic trade routes with Mother England. Even today, Australia’s interior is put to little real use other than as a paddock or quarry. Writer Bill Bryson once described the outback as ‘gallingly useless’. Was he ever wrong! Properly connected to the Eastern electricity grid, the outback could provide sufficient solar and geothermal energy to satisfy all Australia’s energy needs. Already prospectors are at work. A Queensland company called Geodynamics is generating real electricity from hot-dry-rock geothermal energy in the tiny South Australian town of Innamincka. And near the rust-belt Upper Spencer Gulf town of Whyalla, a company called Wizard Power is testing concentrating solar power. Only a fool would bet against either. Once proven, these two projects will herald a new gold rush— but with nuggets measured in degrees centigrade and kilowatt hours per day per metre. Assuming adequate investment, both hot-dry-rock geothermal and concentrating solar power could be scaled up sufficiently in the South Australian outback to start powering places like Brisbane, Sydney, Adelaide and Melbourne. This would be achieved by carrying outback electricity supplies over newly constructed power lines connecting Olympic Dam, South Australia and Roma, Queensland costing about $1-billion. Incredibly, these power lines would pay for themselves merely through the increased efficiency they would bring the existing grid. The benefits they would bring in terms of transmitting renewable energy would, in effect, be ‘free’. Ultimately, such a power link would do for Australia’s Eastern electricity system what standardised rail gauges did for interstate commerce. Then, once new and vast outback solar- and geothermalenergy supplies are plugged into the grid, output from ageing
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coal-fired power plants along Australia’s east coast could be progressively wound down. Better yet, coupling construction of outback power lines for solar and geothermal with construction of new pipelines to carry coal seam methane gas from the Surat Basin in southern Queensland, the nation would lay the network for a future-proof energy infrastructure regardless of where relative prices go between geothermal, solar, wind and natural gas. So much for the technology and economics. The biggest problem, and it explains why mankind is such a messy species, is politics. Huge numbers of people are employed by the coal industry. Large existing property rights are affected by a shift to cleaner energy. However, the overall record of global economic reform is that the wealth generation from increased efficiencies in economies outweigh
Figure 3: A connected Eastern electricity grid could open the way for exploitation of eastern outback solar and geothermal energy.
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Figure 4: Later, the grid could be expanded across Australia’s western deserts to exploit further resources of solar and geothermal power.
transition costs of disruption to legacy industries. Where things go wrong is when governments protect the wrong element of society: shareholders, instead of workers. Shareholders are risk-takers. They know that. They invest with the full understanding they could face the total loss of their investment. The market then discounts these expectations each day in the investment’s price. Workers are different. By nature, they are risk averse. They have families to feed. Therefore, astute economic theory argues that governments seeking to encourage disruptive change should ‘protect the workers, not the industry’. What that means in practice is that governments should shell out pension assistance for displaced ageing workers in sunset industries who can’t re-skill, and provide government assistance to retrain workers with sufficient remaining years in the workforce. This implicit safety net makes
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change less scary. It reinforces the constituency for beneficial change. Governments get into trouble when they are captured by the lobbying interests of shareholders, and ‘protect’ them instead. Down the track, the benefits of reduced friction and the new wealth generated by sunrise industries will pay off any transitory government assistance many times over. As for legacy industries (like coal) that demand ‘compensation’ for adjusting to changes, government should resist. These industries have already transferred huge accumulated environmental and health liabilities to the public sector. Government should settle these historical debts first. Nonetheless, even under a new paradigm of renewables, there will still be a role for coal. As they are replaced by solar and geothermal, ageing coal-fired power plants can be kept mothballed as an insurance policy against higher-than-expected future energy-demand growth. It’s in this energy supply ‘insurance’ market that coal-fired power can find its future place. This brings us to our last point: nuclear power. If for some reason energy consumption outstrips supply, and Australia’s solar and geothermal resources backed up by mothballed coal can’t meet demand, Australia can hold a referendum on nuclear power between 2020 and 2025. By that time, marketplace signals will be clearer and new nuclear technologies will have been proven effective overseas. Nuclear can be Australia’s ‘call option’, exercised only if demand exceeds that which can be provided by renewables and coal. With new and huge energy resources on tap delivered through a flexible national transmission infrastructure that allows the marketplace to allocate resources, Australia could end up creating surplus power. Once that’s done, Australia could lay the groundwork for an energy export market. With a national energy-production infrastructure located in the outback around Moomba and connecting into the east-coast grid, new transmission infrastructure could be laid to connect Australia to provide exportable energy to Asia. This could be done through high-voltage, direct-current (HVDC) power lines. Long-distance HVDC power lines are increasingly commonplace. New York City gets much of its power over 1400-kilometre-long HVDC power lines bringing Quebec hydropower southward. In Europe, plans have been drawn up to build a huge cable connecting electricity markets in Europe to Iceland’s geothermal power supplies.
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Ready templates have been developed by organisations such as DESERTEC, an organisation that promotes ‘Clean Power From Deserts’ and GENI (the Global Energy Network Institute). DESERTEC proposes that a network of concentrating-solar-power plants constructed in North Africa and the Middle East could deliver power via HVDC power lines to Europe. GENI proposes a similar system for the world. Indonesia has an electricity grid that traverses its island chain while subsea telecommunications cables grid Asia. These provide potential pathways. One pathway would be to lay HVDC power lines from Olympic Dam up through Port Hedland in Western Australia and northwest across the Indian Ocean toward interconnections with the Indonesian grid and onward into Southeast Asia and, potentially, China. Building a cable like this could unlock international energyexport sales opportunities that could bring gains to the Australian economy even larger than stringing a cable from South Australia to Queensland. An international cable could similarly spur international development of renewable energy resources, primarily geothermal and wind, in southeast Asia. This would make a huge contribution to battling climate change and cement Australia’s global reputation as a responsible global power and world climate-change leader. There are huge geothermal resources in the Asian region to be exploited due to the tectonically-active ‘rim of fire’ that encircles the Pacific. The Philippines, for instance, already gets 27 per cent of its electricity from geothermal resources. Chevron Corporation estimates Indonesia has 27 000 megawatts electric of geothermal resources. That’s twice Indonesia’s electricity consumption. The world’s most efficient geothermal plant is located at Darajat on the island of Java. It serves the national capital of Jakarta. The Asia region also is rich in wind resources along the same corridors through which a major Australia–China power cable would run. This further opens up enticing possibilities of catalytic combined investment in Australian solar and geothermal, Indonesian geothermal, and pan-Asian wind that could lead to huge economic, social and environmental gains throughout the region. Taken together, a green energy ‘superhighway’ through which regional renewable energy resources flow would create a virtuous
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circle of economic development, lower green-energy costs, and greenhouse gas–emission reduction. An even more intriguing advantage of this plan is that with the seasons reversed in the northern and southern hemispheres, Australia’s hot summer sun could create energy for electric heating in China in the northern winter, while northern hemisphere’s summer winds harvested by Chinese wind turbines in Mongolia and concentrating-solar-power plants in Tibet could help keep Australia warm during the southern winter when Australia’s own plants operate at lesser strength. Building out Australia’s solar and geothermal renewable-energy resources in the outback and connecting them both domestically and internationally to regional consumption markets would utilise existing Australian skills. The world’s longest buried terrestrial HVDC power line is the 177-kilometre ‘Murray Link’ connector between Victoria and South Australia. The 300-kilometre Basslink cable connecting Tasmania to Victoria is the world’s longest subsea cable, built in the harsh conditions of the Bass Strait. While connecting Australia to Asia with big cables for exports of clean energy is audacious, so was the Overland Telegraph project in the late 1800s; so was the Snowy Scheme in the 1950s. Both ended up as iconic symbols of Australian national development. Now, look at things from the other end of the power line: China. China says global warming is a problem created by Western industrialisation and thus is up to the West to solve. A ‘Southeast Asian Clean Energy Superhighway’ might be one way to solve it. China gets clean energy and greater assurance of domestic stability since pollution is a focal point for political unrest. Australia and other countries get a China bound deeply in regional multilateral arrangements in which geopolitical stability is in everyone’s interest. Under such an arrangement, Australia could lower its military spending needs and increase its exports. Australia has huge reserves of natural gas. They’re enough to last the country, at current rates of production, until well after fossil fuels have been replaced by cleaner fuels. These reserves represent a huge resource for the nation—not least of which because it can ‘double the bang for the buck’ in reducing global carbon emissions. As it builds renewable energy resources such as solar and geothermal, Australia should redirect use of its gas resources towards
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peaking power and load-balancing in the domestic grid. The reason is that renewable energy can be intermittent. Given this, natural gas is the ideal backup fuel for cloudy days when solar thermal isn’t producing large amounts of power, or cloudy and still days in which wind and solar may be producing less than optimum. By using natural gas primarily for peaking power and load-balancing in the domestic grid and exporting marginally freed up amounts not used for baseload power, Australia gains twice. Australia gains short-term export receipts and can use those to pay for imported technology to build up a world-class solar and geothermal industry. Then, once it has built up a world-class solar and geothermal industry, it can sell those skills into Asia. Money today, money tomorrow. Win-win. The ‘new economics’ of carbon pricing changes everything. It will radically transform markets in creating a shift to low-emission energy sources. Assuming renewables win the battle against rentseeking fossil-fuel industries seeking cushy sinecures—the global economy will reap even larger gains through flat-price energy. With renewable energy, the fuel is ‘free’ unlike with fossil fuels or nuclear, which must continually pay fluctuating market prices for fuel. With renewables, initial plant and equipment cost a lot to build (dams, windmills, solar farms). But after that’s done the water, wind and sun are virtually ‘free’. Once initial construction costs and interest rates are locked in, energy production costs become highly transparent for the life cycle of the plant. This raises the possibility that energy costs, and hence energy prices to consumers, could be forecast years in advance. In renewable energy, there are no wildcat strikes, oil- or gas-well explosions or any of the other unpredictable events that bedevil fossil-fuel markets and make prices gyrate. In terms of increased global financial stability, the positive implications are impossible to overstate. Here’s just a few: •
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Better signals for investment because real prices become more apparent. This reduces scope for inefficient investments to be made due to inflation-distorted price signals. Much longer microeconomic planning views can be taken of future supply and demand needs by reducing the number of variables to monitor.
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Worries about ‘peak oil’ (that is, the fear we’re running out of oil) are eliminated because ‘peak sun’, ‘peak geothermal’, and ‘peak wind’ (to name just a few) still lie about two billion years in the future.
‘Animal Spirits’ In the 1940s, the famed economist John Maynard Keynes coined a fabulous word to describe creative forces at work in the economy— ‘animal spirits’. It’s a wonderful term. It provokes optimism because his underlying point is ‘you never know what smart ideas motivated entrepreneurs will develop’. The fatal flaw of centrally planned economies was that they suppressed ‘animal spirits’. Properly constructed markets with credible incentives encourage ‘animal spirits’. Right now, huge amounts of ‘animal spirits’ are being unleashed in renewable energy markets. Fabled Silicon Valley venture capitalist John Doerr has gone so far as to call cleantech ‘the mother of all emerging markets’. ‘Animal spirits’ has a corollary in the ‘law of accelerating returns’ developed by futurist Ray Kursweill. The ‘law of accelerating returns’ posits that new discoveries encourage subsequent discoveries to occur even faster. The ‘law of accelerating returns’, on the macro level, is just a broader expression of ‘Moore’s Law’ in the computer industry, which posits that computer power doubles in capacity and halves in price every eighteen months. Here’s some real-world examples of how unleashing ‘animal spirits’ can lead to the ‘law of accelerating returns’. In the 1980s, the International Energy Agency developed some forward forecasts of the uptake of wind energy globally, believing it would slowly march forward and upward. But real expansion in capacity turned out to be multiples of that. That was ‘animal spirits’ at work, largely set loose by Germany and Denmark’s ground-breaking system of thirty-year guaranteed premium ‘feed in’ tariffs for wind energy (and, later, solar). Now, consider telecommunications. In the 1970s, reforms in the industry deregulated government-owned monopoly phone services and increased the power of markets. The result is that globally telephone charges have fallen so low as to be virtually free through ‘animal spirit’—encouraged by start-ups like Skype.
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Once proper incentives are in place (and in energy markets that means carbon pricing) things have a way of happening a lot faster than you would think. The idea of a pan-Asian green-energy super cable carrying Australian sun and geothermal energy northwards, and picking up regionally generated energy as well, may seem crazy today. But like the wind industry, the computer industry and the telecommunications industry—what seems nutty today may seem obvious tomorrow.
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Pursuing Clean Energy Business in India Overcoming Barriers, Finding Solutions Peter Castellas and Erin Kuo
Introduction Accelerating the investment in and deployment of clean-energy technologies in India will significantly help to address the challenge of global climate change, promote economic development, reduce poverty and potentially create great commercial opportunities for Australian companies. But for clean-energy technologies to have a tangible and enduring impact, there are policy, technical and financial barriers that must be overcome. Governments and the private sector must work together, and act decisively, to recognise these barriers and implement actions and solutions to overcome the barriers that lead to accelerated uptake of clean energy. The following overview has been adapted from a report Pursuing Clean Energy Business in India, that was endorsed by the Asia-Pacific Partnership on Clean Development and Climate (APP) and received funding contributions from the Australian government. The aim of the project was to identify the barriers and opportunities to accelerated investment in the development and deployment of clean-energy technologies in India and to determine areas of enhanced commercial collaboration between Australia and India.
The report findings summarised here are a summary of results from a survey and consultations with over 200 clean-energy professionals, and offer a contemporary snapshot of appropriate actions that could be implemented in the near future to accelerate the uptake of clean energy in India.
Renewable Energy in India With both domestic Indian and international concerns increasing over energy security, climate change and sustainable development, the clean energy technology sector is growing at a rapid pace. If commitments to overcome the policy, technical and financial barriers are made by the key stakeholders, India can become a potential world leader in the development and deployment of clean-energy technologies and play a significant role in combating global climate change. In recent years, the Indian economy has been experiencing a sustained boom, with 8 to 9 per cent growth in GDP. Even with the advent of the global financial crisis, the International Monetary Fund report of January 2009 expects India to grow at 5 per cent in 2009, rising to 6.5 per cent in 2010. Huge domestic demand from 1.1 billion citizens will continue to provide some buffer from the fallout of the global recession. To fuel this growth and because of the links between reliable electricity supply, GDP growth and living standards, India, like many of the nations with emerging economies, is making access to a reliable electricity supply a fundamental priority of central government policy. Recently energy demand has outstripped domestic production, and India has become a major buyer of energy. India, with 17 per cent of the world’s population and just 0.8 per cent of the world’s known oil and natural-gas resources, is going to face serious energy challenges in the coming decades. With India’s vibrant entrepreneurial culture, history of technology innovation and massive domestic market, the country is excellently positioned to capitalise on the new dynamic clean-energy market. Clean-energy technologies represent a nascent subsector of the global clean-technology market; however, these technologies are undergoing rapid growth and have potential for significant financial, socioeconomic and environmental benefits.
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In India, increasingly significant deal flow and attractive market opportunities have fuelled investment interest, and accelerated market penetration of renewables; the growth in wind power being a good example. Furthermore, the growth in deployment of renewables is likely to continue strongly and have a key part to play in meeting government policy targets and development goals, and could become the cornerstone of a significant new clean-energy investment market.
Overcoming Barriers, Forging Solutions The APP project consultations and survey results revealed both barriers and potential actions to overcome the barriers that fell into five broad categories. In synthesising these findings, the report found these categories to be as follows: 1 2 3 4 5
Policy—policy measures and incentives, pricing issues, and legal and regulatory challenges; Technical—encompassing research and development, and techno-economic issues; Financial—including gaps in capital availability, skills and risk management; Information—relating to capacity building and availability of current and timely information; and Opportunities for increased international collaboration.
Policy India’s central and state governments have set aggressive policies to encourage the development and procurement of clean-energy technologies. However, in order to increase investment into clean energy in India, the government needs to develop clear and consistent alignment of policies across central and state jurisdictions, and create regulatory frameworks that gives investors certainty over the time frame for their investment and meets their risk/return requirements. As private-sector investment in clean energy must compete with other investment opportunities in energy, infrastructure and broader opportunities that India’s growing economy offers, policy-makers must enhance the regulatory framework and fiscal incentives that
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have been established to date in order to facilitate greater investment attraction to clean energy. The incentives created by government, such as productionbased incentives, feed-in tariffs, and tax holidays, should be carefully considered on a sector-by-sector basis to optimise the success of any new measures. As in many other jurisdictions, one of the most significant barriers inhibiting the growth of clean energy is the subsidy structure applied to fossil-fuel energy sources in India. Putting a fair price on externalities and establishing a ‘level playing field’ will help to remove market distortions and reduce biases against renewable sources of energy and drive long-term growth of the clean-energy sector. Although in India there are strong investor-rights laws and an English common-law system, there are ongoing concerns over weak enforcement in the legal and regulatory arena. This includes issues in intellectual property rights enforcement and delays in project permitting, approval and implementation during the regulatory process. One of the greatest difficulties for the private sector lies in navigating the current policy environment. Establishing a common clearing house or point of reference with current and clearly articulated policies and incentives may enhance private-sector activity. In order to create the necessary framework for increased investment in clean energy in India, governments need to evaluate the successful models of other jurisdictions, create incentives and incorporate private-sector views. Correcting policy biases and enforcing an already robust regulatory framework with strong investor-rights protection will begin to create the enabling environment for foreign investment and increased private-sector participation in the Indian clean-energy sector. Technical To immediately accelerate the development and deployment of clean-energy technologies in India, there needs to be a concerted collaborative effort where best-practice innovations and applications are shared between countries, technology gaps are filled and policy and financial innovations implemented to bring down price and drive large-scale commercialisation.
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Some clean-energy technologies, such as wind, have reached a stage of commercial competitiveness; however, most clean-energy technologies remain in early-stage innovation, technical demonstration, or subsidy/incentive supported modes, as yet unable to compete with conventional fuels on price and performance. Although there are significant variations between each cleanenergy subsector, to accelerate the technology maturation and commercialisation process across all sub-sectors, there is a need for more investment in R&D, expanded collaborative research programs between universities and international agencies, and innovation in technology transfer between countries. To accelerate the path to commercialisation there is also a need for the development of ‘incubators’ to concentrate R&D efforts, test and pilot technologies and to provide the infrastructure to enable a more efficient path to development and commercialisation. Establishing incubators may facilitate sector clusters and develop technology centres of excellence. Incubators will allow some nascent clean-energy technology companies to leverage resources to enable them to increase access to market opportunities. Within India there is a need for greater understanding of the resource availability for renewable resources such as solar, biomass, geothermal and wave/tidal. Increased technical expertise is required to undertake studies to optimise the potential clean-energy capacity. There has not been adequate mapping of the technology centres of excellence or gaps in India as compared to other countries where clean energy may be more mature. Once gaps are identified, an assessment of the international market can be made and technology transfer can be evaluated and facilitated through targeted businessmatching programs and collaborative R&D initiatives. One of the problems in implementing clean-energy projects is the cost of documenting the projects (that is, detailed project reports) relative to the overall cost of the project. Many potential projects are not of sufficient scale to properly document some of the associated challenges compounding resource constraints. Pro-forma project documents for developers would drive down the initial cost of preparing the appropriate project documentation, and familiarity with standard documentation would also build confidence in the projects from the investors and permitting agencies.
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Many of the current energy shortages exist in rural areas where there is a lack of grid connectivity and where distributed generation technologies may be the only way to deliver cost-effective and timely access to energy. With the scale of the challenge to provide power to all and electrify the homes of 350 million Indians, there is an enormous market for off-grid, distributed energy systems. Financial To achieve scaling up of clean-energy technologies, significant investment must be mobilised from the global capital markets, tailored capacity building must be undertaken and innovation in financing mechanisms for funding clean energy must occur. The finance and investment sector has become increasingly interested in clean energy due to a confluence of factors such as global climate change, the rapid developments of new markets of clean energy, interest from their clients in the sector and the successful growth of clean-energy technologies in the global marketplace. However, for many financiers and investors clean energy is a new area where there is uncertainty with the levels of risk and return. Many financiers and investors have not had experience with cleanenergy technologies and projects and some are now finding that they need to increase their understanding of the sector as it grows. Clean-energy projects are generally financed on-balance sheet as financiers are not willing to take the unfamiliar project risks associated with clean-energy projects. This can affect a project’s commercial viability as the cost of capital for the project is increased. As more financiers increase their exposure to the clean-energy market and subsequently offer project and debt financing, it is likely that clean-energy projects can be financed at a more competitive rate. Many clean-energy project developers are small, and it is often difficult to secure finance from potential lenders and investors due to transaction costs and project risks associated with small developments. Developing new techniques in bundling projects is one way to reduce the risks for financiers and help facilitate new clean-energy projects. Although it is often said that there is plenty of money to invest, there is actually a lack of capital available for the early stages of
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technology commercialisation and the early stages of clean-energy project development. To bring more clean-energy projects on stream and to accelerate the commercialisation and scale of new cleanenergy technologies there is a need to provide public and private early-stage financing mechanisms. Financiers and investors often do not have the opportunity to connect with clean-energy companies. But interest in the sector is growing as the clean-energy market gains visibility and becomes increasingly attractive to the capital markets. There is a need for more dedicated initiatives that bring together the key players for knowledge exchange and commercial interaction. The area of carbon finance will increasingly bring financiers (and other capital-market players) and clean-energy technology developers together in India. The Clean Development Mechanism (CDM) in the Indian market is vibrant and growing day by day. Project promoters are ready to invest, making the time ripe for international buyers of Certified Emission Reduction credits to invest in India. Although the CDM is an instrument that offers the opportunity to enhance the deployment of clean-energy technologies, in the long run, penetration of clean energy will depend on the still-emerging architecture of global climate policy, the market for carbon offsets and the pace of development of individual technologies. The relatively young market in India for clean energy has potential for dynamic long-term growth but still lacks access to affordable capital and innovative applicable financial mechanisms. With the development of innovative financial structures and products it will allow greater project- and technology-specific commissioning, uptake and participation in this emerging marketplace. Information There is a need to disseminate information on the clean-energy sector as well as build capacity and share market knowledge among all key stakeholders in the industry as a fundamental prerequisite to accelerate investment and growth of the clean-energy sector. Capacity-building programs need to be tailored differently for different stakeholders. Financiers need a better understanding of the technologies, policies and environmental principles that underpin the market
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opportunity. They tend to lack technical expertise and previous experience in financing clean-energy projects, thus are unable to create a project-evaluation matrix, disaggregate project risks, reference procedures or benchmark performance. This lack of previous experience and unfamiliarity with the technologies and clean-energy companies and projects creates heightened perceptions of risk and may increase unwillingness to finance or participate in deals. Technology entrepreneurs and project developers need the ability to communicate their investment propositions more effectively to financiers and investors so they can better analyse, appraise and subsequently invest in or finance a clean-energy project. Essentially they need the skills to pitch their investment prospects to attract finance. Policy-makers would benefit from a better understanding of the needs of the private sector. There needs to be more open effective two-way channels established for the transfer of market and regulatory information between policy-makers and the private sector. For policy-makers it is also important that they provide information on policy developments in clean energy to facilitate better engagement with the private sector. Another element of capacity building relates to carbon finance. Although there is uncertainty around post-2012 Kyoto, there is a need to build capacity to understand the CDM process from a financier’s perspective and to obtain project registration for project developers. The Central Indian Government, state governments, development finance institutions, private-sector funds, and others are all enacting initiatives; however, all of these ‘competing’ activities can be confusing. There is a need to centralise the information and create networks where people can have dialogue and share information on their initiatives. For all clean-energy stakeholders getting access to contemporary information on clean energy is difficult. There is a need to centralise information, such as an online portal, on the clean-energy industry to make it easier for people to access information. This would be the sort of mechanism to share information on examples of successfully financed projects, available funding mechanisms and options, technology breakthroughs, new policy initiatives, business missions and collaborative opportunities. Although Indian
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institutions such as the Ministry for New and Renewable Energy, the Indian Renewable Energy Development Authority and the Energy and Resources Institute and other organisations have clean-energy information available, it is often difficult to aggregate and may not be timely, consistent or thorough. It is clear that investors, developers and technology entrepreneurs are lacking opportunities to connect. Thus, there is a need for specific clean-energy investor workshops and forums where the key stakeholders can share market knowledge and commercial transactions can take place. Key initiatives that have brought together the key stakeholders have been the Indian and AustralAsian Cleantech Forum events run by Cleantech AustralAsia. In addition to valuable knowledge exchange, these annual events, held in Melbourne and Delhi, have enabled commercial transactions to occur, such as Indian companies attracting investment, Australian companies finding joint-venture partners and new Cleantech funds being launched. Opportunities for Collaboration: Australia/India Australia has some ‘mature’ commercially proven clean-energy technologies, products and services that could be adapted and deployed in India (see figure 1). Yet more needs to be done to quickly and efficiently transfer these technologies to India. The business and investment opportunities are significant for those Australian companies who get in on the ground level as the Indian clean-energy market grows. The time to act is now. A sample of Australian technologies with application to India is as follows: • • • • • • • • •
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Thin-film solar technologies Solar-thermal power generation Solar cooling technologies Solar PV-system components Off-grid solar applications Concentrated Solar Power (CSP) Combined heat and power solar Energy storage Waste to energy processes
Peter Castellas and Erin Kuo
Technology
Solar PV
Solar Thermal
Wind
Examples of Indian Companies
Technology Gap/ Opportunity
Examples of Australian Companies with Potential Relevance
Moser Baer Tata BP Solar Orb Energy Selco
Thin-film technologies Grid interactive projects Joint ventures with PV manufacturers Module technology improvements
CSG Solar Telepower Australia Dyesol Limited PV Solar Energy Origin Energy Selectronics Solar Systems
Anu Solar Power Emmvee Solar Systems Bharat Heavy Electricals Ltd Inter Solar Systems
Hybrid power systems Non-grid solar Solar building technology applications Solar cooling technologies Concentrated solar
Solahart Industries Enviromission Ltd. Solco Ltd Wizard Power Aquamax Rheem
Suzlon Vestas RRB Enercon (India) GE Wind Energy India
Low wind regime machines Gear boxes Control systems Small wind machines
Windlab Systems Allco Wind Energy Asia/Pacific Roaring 40s Aeorgenesis Australia Babcock & Brown Pacific Hydro
Portable SHP Low head power systems High-efficiency systems Renovation
Platypus Power Rainbow Power NUE Pty Ltd Stanwell Corp. Hydro Tasmania
High-pressure boilers High-power gas turbines Handling and storage Co-firing and blending
Macquarie Generation Austrian Energy and Environment (Aust)
Small Hydro Bhoruka Power Corporation Bharat Heavy Electrical Ltd HPP India Sulzer Hydro Biomass
Krupp Industries India Nucon Energy DESI Power Aruna Electrical Works
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Examples of Indian Companies
Technology Gap/ Opportunity
Examples of Australian Companies with Potential Relevance
Waste to Energy
APTDPC Combustion Research Associates Energy Developments India
High-rate biomethanasation Incineration Sanitary landfills Financing
Landfill Gas and Power Energy Developments Ltd Pulse Energy Clarke Energy Australia Envirogen
Geothermal
Oil and Natural Gas Corporation
Resource assessments Geodynamics Ltd. Project developers Torrens Energy All technologies Green Rock Energy Petratherm
Technology
Ocean Power
Other
PCM Energy India
Project developers All technologies Pilot programs
Tidal Energy Australia Oceanlinx Ltd
Energy storage Rural electrification
Pinnacle VRB Ltd. Barefoot Power
Figure 1: Opportunities for Australia/India commercial collaboration in clean energy.
• • • •
Bagasse cogeneration Wood-waste processing Wind-energy forecasting Small Hydroelectric Power
While India holds tremendous intellectual capital and remains at the forefront of innovation, not all technologies available in the Indian market are technically feasible or sufficiently financially viable to be able to meet the market demands. There are technology gaps that need to be filled before the scale of the problems and opportunities can be tackled. Until recently, Australians have tended not to travel to India to develop business opportunities in clean energy. This has been through ambivalence about the market, the perceived difficulties in doing business, uncertainty about the political environment, a lack of understanding of Indian culture and a lack of knowledge of the market opportunities. Yet there is clearly a need for some Australian cleanenergy technologies, products and services that Australian companies could offer the Indian market.
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Initiatives such as strategic, focused business missions and business/technology matching programs need to be instigated to create incentive and encouragement for Australian companies to investigate and develop the Indian market. Governments can enhance commercial opportunities for Australian companies to do business in India by better aligning trade, aid and diplomacy and working more closely with private-sector participants who have an interest to export. But, clearly to effect large-scale technology diffusion, the appropriate commercial structures, such as joint ventures or licensing agreements, and the technologies transferred must be initiated, adapted and indigenised to the local Indian market. This takes time, effort, R&D and, typically, further investment. Fiscal and financial incentives are now in place for international companies to invest and establish themselves in India. From a
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Figure 2: These recommendations will require partnerships in the development and implementation of solutions to accelerate the clean-energy market between Australia and India.
commercial aspect, the Indian government has now made it possible for Australian companies and investors to enter into a joint venture in India not only for manufacturing clean-energy devices/products but also for manufacturing clean energy-based power-generation projects on the Build, Own and Operate (BOO) basis. Cultural barriers may pose additional challenges for Australian companies attempting to enter the Indian marketplace. As yet, there
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are few examples of successful business-to-business commercial clean-energy partnerships or transactions between Indian and Australian enterprises. However participation of Australian firms in Cleantech AustralAsia’s Indian Cleantech Fora, the positive high-level contribution of key stakeholders to this APP project and the new focus Austrade has on clean energy indicates that the interest in the market opportunity in India is now firmly on the radar. For Australian companies interested in the Indian market there is an opportunity to bridge knowledge gaps and export technologies, products and services that could provide significant commercial opportunities, leapfrogging of viable technologies and innovative financing.
Strategic Action Plan Through the APP project, Cleantech AustralAsia developed a number of strategic actions that were presented to the Renewable Energy and Distributed Generation Taskforce that could be taken to accelerate investment in and deployment of clean-energy technologies in India. The recommended strategic actions are summarised in figure 2 and have been grouped under key strategies, which we have termed ‘accelerators’. The accelerators are the main strategic direction that, if pursued by government and the private sector, would lead to scaling up of clean-energy technology in India and greater collaboration from countries such as Australia. The accelerators can also be considered as key market-enabling factors. The ‘actions’ are a combination of new initiatives and others that have been proposed or may have some current and recent activity. Urgent action is required to address climate change, and the actions linked to each of the five key accelerators provide solutions that can be implemented in the near future. Linked to each action is the potential project that governments can support to take the lead in coordinating, facilitating, funding and implementing. We would like to acknowledge that many organisations across many countries, including the APP, are implementing various actions and initiating actions under some of the recommended accelerators. However, in most of the recommended actions, more can be done. For example, where resource mapping has been extensive in some regions, a more thorough study in conjunction with technology
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mapping to identify strengths and opportunities for technology collaboration needs to be undertaken. Where trade business missions are occurring, targeted business matching and pre-screening can help accelerate activity.
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Part 6 Global Opportunities
W
e have considered all of the various self-interests that are necessary to deliver viable solutions, but now we come to what it is all
about. The opportunity presented for the world as a whole is awesome. With all of the activity described in this book, a new world can be constructed piece by piece that will build on the experience gained and lessons learned from the past. It is not a simple task, but it is certainly one worth the effort required. There have been times in the past when the world has experienced great changes and, by considering these times, we may be able to secure some guidance for our current challenge. AC Grayling writing in the New Scientist in July 2008 discussed the Enlightenment and how it was seen as a threat to the entrenched interests of the eighteenth century. He quoted Immanuel Kant’s 1784 essay ‘What is Enlightenment?’ as follows: ‘Sapere Aude! [Dare to know!] Have courage to use your own understanding! That is the motto of the enlightenment’.1 The world is largely distracted by the downsides of climate change: the loss of species, the decline of industries. Global opinion is framed by the guidance of both those with much to lose and those with great concerns. Is it possible to start a twenty-first-century enlightenment of sustainability? This time we will look at the world through a different lens: one that sees the opportunities for change and improvement that climate change offers. Grayling concludes his essay with ‘If one compares the lives of ordinary people 300 years ago with those we can enjoy now, the impact of the Enlightenment on the structure and practice of society can be fully appreciated—and admired’.2
By grabbing the opportunities presented by the current global changes, there is a chance that people may look back on the twenty-first century with a smile. They may see how we took on the challenges of the time and delivered a world where the quality of life moved up to a higher level. This is the global opportunity that we have in front of us.
Notes 1 2
Immanuel Kant ‘What is Enlightenment?’ cited in AC Grayling, ‘How Humans Dared to Know’, New Scientist, no. 2666, 23 July 2008. AC Grayling, ‘How Humans Dared to Know’, New Scientist, no. 2666, 23 July 2008.
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Protecting Today, Promising Tomorrow Amanda McKenzie
… here we face a critical branch point in history, what we do with our world, right now, will propagate down through the centuries and powerfully affect the destiny of our descendants, it is well within our power to destroy our civilisation and perhaps our species as well. Carl Sagan1
Introduction In 1990 Voyager 1 an American spacecraft was asked to turn its lens back and photograph Earth from a distance of six billion kilometres. For the first time humanity could see the Earth as it was, a tiny blue jewel suspended in the vast black expanse of space. The entire history of humanity, from the depths of human evil to the most wondrous of human compassion and genius; all the people you or I have ever loved, known or heard of; all we have ever known, our only home, all is here, on Earth.2 It may then seem odd then that this is the location for the most wide-ranging experiment ever conducted—climate change. Climate change is about the environment, it is about the economy, it is about technology, it is about politics, it is about people. The terrible irony of climate change is that those who have contributed least to creating the problem are likely to suffer the most from its
impacts. Hence, at its core, climate is about morality. Future generations, today’s younger generations and the world’s poor will be disproportionately impacted by the changes that are anticipated. There are strong reasons to believe that we have a moral obligation to ensure that the way we behave today does not compromise the ability of people in the future to meet their needs. Our obligation stems from principles of fairness, justice and knowledge, as well as reflecting our law and common beliefs. This chapter explores an approach to climate policy from a position of ethics, the foundations of an ethical policy and what such a policy would entail. Approaching climate change from moral first principles requires a reframing of the way in which we construct climate policy and our thinking about the legacy we leave the future.
Climate Change—Now and into the Future Climate change is having, and will have, devastating impacts on natural systems, threatening ‘the basic elements of life for people around the world—access to water, food production, health and use of land and the environment’.3 Globally temperature has already increased approximately 0.8 degrees Celsius since the Industrial Revolution, and we are beginning to watch the consequences unfold.4 From sea-water inundation of fresh-water supplies on Pacific Islands, to the worst drought for a thousand years in Australia, and to the worst flooding in living memory in south Asia. In each of these places and more, people are losing their homes, livelihoods and cultures. However, while climate change is already having an impact, the worst impacts are expected to occur in the future. There are a number of reasons for this. First, once greenhouse gases are emitted it takes decades for the full impact to be felt, meaning that even if we stopped emitting today we would still feel the impact into the future. Secondly, carbon dioxide, a key greenhouse gas, can exist in the atmosphere for a long period, with the average molecule of carbon dioxide existing in the atmosphere for hundreds, and potentially thousands, of years.5 Unless we find a method of removing large quantities of carbon dioxide from the atmosphere permanently, gases we emit today will continue to impact upon global climate for a long time to come.
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Thirdly, our emissions are continuing to rise daily, with projections that continuing with ‘business as usual’ could treble the amount of greenhouse gases in the atmosphere by 2100, leading to a substantial increase in global temperature and a permanent reduction in global per-capita consumption by at least 5 to 20 per cent.6 Fourthly, as global temperature rises we are becoming perilously close to triggering ‘runaway climate change’, that is where natural systems begin to contribute to global warming to such an extent that climate change is no longer in our control. For instance, permafrost in the Arctic region has begun to release substantial quantities of methane, a potent greenhouse gas, which then contributes to climate change, causing global temperature to rise further, which in turn causes more permafrost to melt which releases more methane. This is called a positive feedback loop and there are many of these types of systems existing in nature. The risks for future generations associated with triggering positive feedback systems is grave as it substantially inhibits, if not destroys, any human control over global warming. Essentially it becomes too late to prevent large-scale and unprecedented upheavals to the global climate, and future generations will be forced to simply weather the storm. Lord Nicolas Stern has stated that if we fail to take adequate action now, the economic and social disruption caused by climate change in the future will be on the scale similar to that experienced by the Depression and both the world wars combined.7
Should We Care about the Future? The scale of the impacts, the long-lasting nature of carbon dioxide in the atmosphere and the potential for us to cause irreversible harm to the planet means that the legacy of current generations will significantly impact upon the ability of people to meet their needs not only in the immediate future but for many, many generations to come. A key question in addressing climate change then becomes, should we care about people who live in the future? Our current behaviour suggests that our collective answer to this question is no. Despite clear and irrefutable scientific evidence that climate change is having and will have severe adverse impacts, as a global community our greenhouse-gas emissions continue to accelerate. In Australia we have never
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emitted more than we do today. However, regardless of this behaviour, there are a number of strong reasons to suggest we actually do believe that we should and do care about people who will live in the future. Self-Preservation Perhaps the most obvious reason for addressing climate change is that impacts are being felt already and will be felt within the life span of most of the world’s population. The Garnaut Climate Change Review details that without substantial mitigation efforts we can expect to witness significant impacts in Australia, for instance a 20 per cent reduction in some crops, major productivity losses in water supply to East Coast cities, and a 49 per cent reduction in economic value of the Murray Darling Basin by 2030.8 Many scientists also argue that many devastating and costly extreme weather events experienced in the last few years have been caused or significantly exacerbated by climate change, for instance Hurricane Katrina. Regardless of whether this can be conclusively proven, it is clear that projections, in many areas of the world, are that extreme weather events will be exacerbated. Hence from a simple risk management point of view it would seem prudent to act to minimise these risks through effective climate-change mitigation. A Question of Ethics The paradox inherent in the climate-change problem is that those who have contributed least to creating the problem, are likely to suffer the most from its impacts. While the benefits of emitting greenhouse gases have been realised over the last 200 years, in the form of cheap energy, the bulk of the costs—the impacts of climate change—will be felt in the future. Future generations who have done nothing to create the problem will be faced with coping with a changed climate. The longer we take to deal with climate change the more difficult and costly it becomes to address. Moreover, we have a very urgent timescale, the Intergovernmental Panel on Climate Change (IPCC), a grouping of 2000 of the world’s climate experts, has conservatively stated that to prevent significant risks we must reverse emissions of greenhouse gases by 2015.9 We are the last generation that can solve the problem. It would be a terrible injustice for current generations to satisfy ourselves by impoverishing and endangering our successors.
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While climate change is having, and will have, an impact on people across the world, the poorest people are already suffering disproportionately. In an awful twist of fate many areas of the world likely to be most impacted by climate change are home to the world’s poorest people, who have contributed the least to the problem, and have the least resources to protect themselves from its impacts. Bangladesh is one of the world’s poorest and most densely populated countries. It ranks third after India and China in the extent of poverty with the average wage just over A$1 per day.10 While per-capita emissions are ninety-four times smaller than in Australia, most of the country, made up of low-lying flood plains, is very vulnerable to climate change—in particular rising sea levels and increased frequency and severity of extreme weather events.11 It is predicted that as many as thirty million people—more than the entire population of Australia—will lose their homes and livelihoods, and encounter difficulties accessing education, food, water and shelter by the end of the century.12 In addition, poorer people within nations can expect to be worst impacted by climate change as they have the least access to resources to enable them to adapt and cope with negative changes. Underpinning our legal system, what children are taught and, indeed, the framework within which most people operate, is the principle that ‘with knowledge comes responsibility’. Where a person, company or government’s activities adversely impact upon the interests of others, an obligation is imposed upon the responsible party to remedy the situation. The degree to which the community values this principle is demonstrated in scenarios where it is not afforded. For instance, the community reaction to companies who, knowing asbestos was dangerous, continued their use of it and then attempted to deny remedy to workers who became ill. Importantly our generation knows that climate change is having an impact today and that there is substantial evidence that it will have devastating, and potentially irreversible, impacts in the future, particularly on the most vulnerable people in the world. Collectively we know that a vast array of solutions to climate change are readily available, as detailed elsewhere in this book, and simply need to be utilised. Research has consistently showed that the costs of adequately addressing climate change today are manageable and significantly less than the costs of inaction.13 As mentioned above, the best science has told has that we
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are the last generation that can adequately mitigate climate change to ensure the most severe impacts are prevented. In the face of this knowledge it would be morally reprehensible to fail to take responsibility for our actions. Hence climate change should not only be thought of as an environmental or economic issue, instead at its core, climate change is a moral issue: it is about justice and it is about fairness. International Law The Preamble to the Universal Declaration of Human Rights, a international treaty signed by almost every nation in the world, states that ‘recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world …’ This is reflected in the United Nations Charter, the International Covenant on Civil and Political Rights, International Covenant on Economic, Social and Cultural Rights, the Declaration on the Rights of the Child, the Declaration on All Forms of Racial Discrimination, the Declaration on the Elimination of Discrimination Against Women and many other treaties revealing the deep roots in international law for the fundamental respect for the inherent dignity of all people. Rights are afforded to all people regardless of gender, class, race, creed or community. There is no reason to think that this does not have both a temporal as well as spatial dimension. If as a global community we respect the inherent dignity and rights of all people on the basis of their humanity, why would this only apply to people alive today, and not apply to someone born tomorrow? A person born tomorrow is as human as someone born yesterday, and thus on the same basis that international law acknowledges the rights of the present generation on the basis of their humanity, it is logical that this would apply to future generations. Further, in respecting the rights of younger generations and communities living in areas vulnerable to climate change, surely it is crucial to consider the effects of our actions on both their present and future wellbeing. While human rights are certainly not always respected across the world, the fact that so many countries have signed human-rights treaties demonstrates the strong and unifying belief globally in the inherent dignity and equality of human beings through space and
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time. This reflects the teachings of all the world religions, which all acknowledge our responsibilities to future generations as stewards of the planet. On the basis of self-preservation, morality, law and common belief it appears that as a global community we believe we have an obligation to future generations.
What Type of Obligation Do We Owe? If we owe an obligation to both younger generations and future generations, a difficult question then arises of what this obligation involves. In doing so it is useful to employ the following thought experiment.14 Imagine you have not yet been born. While you know that you will in fact be born, you do not know at which point in time that will be. From today’s perspective, you may be born into the past, present or future. From this perspective how should generations value the generation following them? How would you feel if you knew you were going to be born in the future? How would you want the present generation to value you? Edith Brown Weiss argues that, from this perspective, it can be anticipated that each generation would want to inherit the Earth in at least as good a condition as it has been in for generations before them, and to have at least as good access to its resources.15 To put it another way, it is an obligation to ‘conduct ourselves so that we leave to the future the option or the capacity to be as well off as we are’.16 This view reflects the human-rights paradigm, which both affords rights and imposes obligations upon others to respect those rights. In this context, members of the present generation have an obligation to respect the rights of other members of their generation today and into the future, as well as the rights of future people. This obligation at its most basic requires members of the present generation to refrain from acting in ways that will adversely impact upon the ability of other people to meet their needs in the future. Considering this we can expand our frame to consider humanity as a vast family across time. We hold the Earth in common with human beings past, present and future. Each generation has rights to use and benefit from the Earth, as well as obligations to pass it to subsequent generations in a state from which they too can benefit. For the present generation that means that in our use of the planet’s resources we ensure that the systems necessary for healthy and
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decent human life are sustained, which can be called intergenerational equity. This concept of intergenerational equity has been criticised as conflicting with intragenerational equity, that is, equity within the present generation. It has been argued that pressing issues of poverty and development must be addressed before addressing climate change as they require more urgent attention. This argument implies that addressing the issues are mutually exclusive, that there is only a certain amount of time, energy or resources that can be distributed between them, and further, that if resources were not used to address climate change they would instead be used to address poverty. There is little evidence to support this position. Indeed, addressing climate change must involve addressing poverty. Contrary to being mutually exclusive these issues are closely intertwined. It would be strange to be deeply concerned about future people while ignoring the suffering of present people. As mentioned above, the poor and vulnerable across the world are likely to be the worst impacted by climate change, now and in the future. Indeed, the plight of poor people around the world is entangled with how effectively climate change is addressed. While industrial development has been the cause of rapidly increasing greenhouse-gas emissions globally, this does not imply that poor countries should be denied the right to develop. Instead, it means that wealthier countries must assist poorer countries to utilise clean technologies that allow them to leapfrog over the mistakes of the past. This requires an international agreement that includes provision for just technology transfer, and financing for renewable energy and energy-efficiency technology. This should not be thought of as charity, but rather as compensation as wealthy countries have contributed the most to causing climate change. Many solutions to climate change can also address poverty, for instance green jobs training in the United States targeted to marginalised people has created an important avenue for people to break cycles of poverty. Climate change, as a truly global problem, is intertwined with other issues of global poverty, health and sustainability. Consequently a lasting, robust solution to climate change must also be cognisant of the interrelation of these other issues, and have an eye to holistic solutions that can address these problems together.
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Representing the Future While future generations will be adversely affected by decisions made today, they obviously cannot have input into current decision-making nor remind us of our obligations to their wellbeing. Similarly, younger generations have been largely left out of the debate about climate policy. This is reflected in the lack of focus about the consequences for these groups in the public debate. Many young people in Australia and around the world have been creating ways to participate in the debate and speak for their interests. Whether it is riding around Australia raising awareness, a solar-powered road trip around India, holding schools conferences and workshops, speaking to politicians and business leaders, installing recycling systems in schools, writing submissions to policy forums or campaigning for clean energy in universities, young people across Australia are taking action. These youth activities communicate the simple message that young people deserve to enjoy the same stable climate that their parents, grandparents and generations before them have enjoyed. Today’s young people must demand their rightful place in the decision-making process. If they wait until they are in positions of power and influence, it will be too late. However, the flip side is that young people must also be afforded avenues of engagement, and be viewed and valued as important stakeholders. Similarly, future generations and the very young who cannot speak for their own interests must also be represented. Weiss suggests creating an Ombudsman for Future Generations, a legal representative of future generations, whose role would be to act on behalf of those who will inherit the planet and represent their interests. This would give future generations a voice in all major decisions that will have a material effect on their future, in particular, climatechange policy. Further, given that many young people will not be of voting age within the urgent time frame required to address climate change, their carers—families, schools and governments—in an ethical framework would need to act as both advocates of their interests and empower them to advocate their own interests. It would seem inconsistent for parents to invest so substantially in most elements of their children’s future, providing them with love, nurture, guidance and education, while not playing a role to ensure that Australia will be a habitable place to live.
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An Ethical Approach to Emission Reduction Currently the discourse on climate change, globally and domestically, has generally been underpinned by the question ‘How do we avoid dangerous climate change?’ Dangerous climate change has largely been equated to 2 degrees or more of global warming. ‘Dangerous’ in this context is deceptive. It implies that consequences prior to some threshold will not be dangerous. It implies that climate change is not already causing dangerous consequences—victims of Hurricane Katrina, and other recognised climate-change influenced natural disasters, would certainly disagree.17 Further, it is misleading. The consequences that can be expected at 2 degrees warming are not merely dangerous. Instead 2 degrees is widely recognised as a threshold that should not be crossed due to the high risk of catastrophic climate change. These risks are widely documented and include substantial consequences for Australia, like a 40 per cent reduction in agricultural production.18 As mentioned above, a particular risk is where positive feedback loops in natural systems contribute to global warming to such an extent that climate change proceeds out of human control.19 Surely the basic premise for determining policy should be based on what we want to achieve, rather than what we want to avoid. What do we want to achieve? Two clear ethical objectives can be garnered from the discussion above. First, to protect current generations, now and into the future, and secondly, to respect our obligations to future generations. The questions underpinning climate policy become ‘What constitutes a habitable climate for current and future generations? How do we fulfil our responsibilities to future generations by ensuring that the climate we pass on is no worse than what we received? How do we ensure that our actions do not adversely impact the climate and thus the ability of future generations to meet their needs?’ What constitutes a habitable climate is a question that cannot be answered conclusively by this chapter. Currently observed evidence suggests that the climate system is responding more quickly to increasing greenhouse-gas emissions than expected, with observed data being at the upper end, or exceeding, IPCC’s model predictions.20 The most recent science demonstrates that the climate is much more sensitive to global forces than previously thought. For instance,
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melting is occurring so rapidly in the Arctic that scientists now suggest that the North Pole will completely disappear over the summer of 2013, ninety years earlier than IPCC predictions.21 This is made worse by the fact that global emissions are rising much more quickly than predicted in even the worst-case scenarios projected by the IPCC.22 The atmospheric concentration of greenhouse gases is currently already at levels that are estimated to give us at least a 50 per cent chance of reaching or exceeding 2 degrees of global warming.23 Scientists offer a comprehensive analysis of what climatic changes can be expected after 2 degrees of warming, some of which has been detailed above. However, most worryingly, it poses a substantial risk of triggering positive feedback systems. To be taking this level of risk with such severe potential consequences is not merely negligent but displays reckless disregard for the future wellbeing of people around the world. It is certainly not a prudent risk-management strategy and suggests that we are failing in our obligations to both vulnerable people today and future people. Instead, James Hansen, Head of the NASA Goddard Institute and IPCC scientist, has found that the upper limit for carbon-dioxide concentration stabilisation should be 350 parts per million (ppm).24 Hansen argues that the current level of greenhouse gases in the atmosphere, around 383ppm, is already dangerous suggesting that we may well have to actively take carbon out of the atmosphere to ensure a habitable climate. Professor Ross Garnaut has also acknowledged that it is in Australia’s interests for the world to aim for a greenhouse-gas stabilisation of 400ppm, which while not detailed, is presumably following on from Hansen’s work. While there has been some notable work, there is not currently adequate research on what this means for global emission-reduction targets.25 The IPCC has found that to stabilise emissions at 450ppm, global emissions would need to be reduced by 25 to 40 per cent by 2020. Consequently this means significantly more rapid reductions to meet a 350ppm scenario. However, even with a 350ppm scenario there is still expected to be adverse climatic impacts. Indeed, given the level of uncertainty in attempting to predict the impacts of anthropogenic influence on the incredibly complex global climate system, the most certain evidence is that for the last 12 000 years human beings have existed in a
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relatively stable global climate, where carbon-dioxide levels were stable at 280ppm. If we were truly to pass on a climate to future people that was similar to the one that has enabled civilisation to develop, it may be that we need to bring emissions back to preindustrial levels. This may be physically impossible and illustrates that future people, at least for some generations to come, will not be able to enjoy the same access to many of the Earth’s resources as generations before them. It is submitted that this only goes to amplify the urgency with which current generations endeavour to prevent the worst impacts of climate change. Further to this, climate change—to whatever extent—will have diverse impacts; some areas of the world will be more badly effected than others over varying time frames. Also, people experiencing these impacts will have contributed in varying degrees to the problem, and will have varying capacity to cope with the changes. This further illustrates the depth of the ethical considerations in responding to climate change and underlines the need for strong, urgent mitigation policies. In the book the Gathering Storm, Churchill tells the story of the interwar years where he struggled to raise an awareness of the extent of the dangers of Nazi Germany.26 His foresight and determination to prepare for a threat that seemed distant and uncertain to many, proved critical to the survival and liberty of Britain. Climate change is the gathering storm of our generation, and people in the coming decades and centuries will look back at this moment as crucial in human history. Will we have the courage to acknowledge the true severity of the problem and to steer humanity on a new course? We are lucky, for at least four reasons. First, if we take sufficient large-scale action now we can prevent the worst impacts. Secondly, as detailed in this book, many of the solutions are available and are ready to be rapidly upscaled and deployed. Thirdly, as a planet we are the most educated, wealthy and connected that we have ever been. Consequently we’ve never been in a better position to find the breakthroughs that are needed, whether they be technological, economic, social or political. Fourthly, there is enormous potential for business opportunity and job creation in solving climate change, which can offset some of the costs of transitioning to a low-carbon economy. Increasingly people are demanding to work and purchase from companies that have a positive impact on the environment. This is the
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gathering storm of public opinion, particularly young people who have grown up with knowledge of climate change and are increasingly actively looking to be part of the solution. Australia, in particular, as one of the sunniest and windiest countries in the world, and with abundant supplies of geothermal energy, could become a renewableenergy powerhouse capitalising on the emerging green economy said to be worth US$3.1-trillion by 2020.27 However, there is no denying that solving the climate crisis is an enormous challenge. Currently as a globe we face an uncertain future. We are at a fork in the road and both paths lead to futures that are radically different from the present. Down one path, we choose to take no action to address climate change or inadequate action. All the scientific evidence suggests that this choice means that we will live in a changed climate which for the most part will be significantly less hospitable in comparison to the climate human beings currently and previously experienced. Alternately, we choose to attempt to prevent large-scale climate change and protect the rights of people who will live in the future. This requires a rapid, large-scale transformation in the way we use energy, buildings, transport, infrastructure, and agricultural processes, as well as many industries and the way we manage waste. The scale of transformation required, coupled with a very short time frame, suggests that it will be very challenging. However it is worth noting that while it remains technologically possible to implement the large-scale change required, the central obstacle is whether there exists the political will to do so. There are those who argue that it is impossible to find the political will to reduce our emissions sufficiently within the short time frame required.28 Indeed the scale of change necessary will require enormous cooperation within and between countries. Solving climate change will be a true test of humanity, of whether as a global community we can put aside differences and work together for the good of all people. The good news is that history is on our side. The best examples of humanity, our greatest compassion, innovation, ingenuity and capacity for co-operation, often emerge at times of great adversity. Further, many of the most important human initiatives that seemed impossible initially have subsequently been achieved. Experts argued that laptop computers and mobile phones would never be widely
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used, that a moon landing would be impossible, and that civil rights would never be achieved for African-Americans. Given the examples of human success in the face of significant political, moral and social challenges, the scale of the current challenge should not be used as a reason not to seek to adequately address it. Indeed, we owe it to ourselves, our children and future generations to take the action that is necessary, not simply what we believe is possible.
Conclusion What a storm can also represent is the washing away of an outdated paradigm and a chance for renewal and fresh ideas. Climate change is a moral issue. Living the way we do now, means that generations in the future will not be able to. In the decades and centuries to come, future people will look back at this moment in time with one of two responses: either repulsion at our drastic lack of care for future generations, or in awe as the generation that pulled the human race back from the brink and steered it to a new paradigm: a clean, green and sustainable world. Together the global community stands at a fork in the road. Both paths are uncertain, both will have costs, both will transform the world. We can either choose to take the action we know is necessary to reaffirm our commitment to the welfare not only of ourselves, but also of our children and future generations, or, we can fall short which will led us to a changed climate. With the urgency of the problem increasing every day, immediate, cooperative and compassionate action is necessary, because to fail, in the words of Professor Garnaut, ‘would lead to consequences that would haunt humanity until the end of time’.29
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Carl Sagan, Cosmos: A Personal Voyage, Episode 8: Journeys in Space and Time, television program, 1990. Adapted from a quote by Carl Sagan, Pale Blue Dot: A Vision of the Human Future in Space, Random House, New York, USA, 1994. Nicholas Herbert Stern, The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge, England, 2006, p. vi. The current atmospheric stock of carbon dioxide in the atmosphere is approximately 383 parts per million (ppm) an increase of 37 per cent since the Industrial Revolution; WMO Greenhouse Gas Bulletin, World Meteorological Organisation, no. 4, 14 November 2008; S Solomon et al,
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‘Summary for Policymakers’, in Climate Change 2007: The Physical Science Basis, IPCC, Cambridge University Press, Cambridge, United Kingdom and New York, USA, 2007; Nicholas Herbert Stern, Stern Review: The Economics of Climate Change—Executive Summary, HM Treasury, www.hm-treasury.gov.uk/independent_reviews/stern_review_ economics_climate_change/sternreview_summary.cfm, 2006, p. iii. David Archer, ‘Fate of CO2 in the Geologic Time’, Journal of Geophysical Research, 2005, p. 110. Approximately 25 per cent of the carbon dioxide we emit will remain in the atmosphere for 30 000 to 35 000 years. Nicholas Herbert Stern, Stern Review: The Economics of Climate Change— Executive Summary, p. iv. Nicholas Herbert Stern, ‘Stern Review Report—On Emissions Trading’, Australian Emissions Trading Forum, 2007. Stern’s modelling found that each tonne of carbon emitted now will cost at least US$85 damage in the future, in comparison with the price of reducing 1 tonne of carbon in the different emission-trading schemes being priced at US$25. Ross Garnaut, The Garnaut Climate Change Review: Final Report, Cambridge University Press, Melbourne, 2008, chapter 6. Terry Barker and Working Group I to the Fourth Assessment Report of the IPCC, ‘Summary for Policymakers’ in Climate Change 2007: Mitigation of Climate Change, IPCC, Cambridge University Press, Cambridge, United Kingdom and New York, USA, 2007, www.ipcc.ch/SPM040507.pdf Bangladeshi Institute of Labour Studies, ‘Overview of Current Economic Conditions in Bangladesh’, Global Policy Network, 2003; ‘The Human Development Index: Bangladesh’, United Nations Development Program, 2004, http://hdrstats.undp.org/countries/country_fact_sheets/cty_fs_ BGD.html ibid.; Garnaut, p. 153; and ‘The Human Development Index: Bangladesh’, United Nations Development Program, 2004, http://hdrstats.undp.org/ countries/country_fact_sheets/cty_fs_BGD.html High Commissioner for Bangladesh Sabihuddin Ahmed, ‘For My People, Climate Change Is a Matter of Life and Death’, The Independent, 15 September 2006. McKinsey and Company, An Australian Cost Curve for Greenhouse Gas Reduction, 2008; Garnaut. Edith Brown Weiss, ‘Intergenerational Equity: Toward an International Legal Framework’, in Nazli Choucri (ed.), Global Accord: Environmental Challenges and International Responses, 1995, pp. 333, 335–36. This has been adapted by Weiss from Rawl’s Original Position theory. ibid. Robert M Solow, ‘Sustainability: An Economist’s Perspective’, The Eighteenth J Seward Johnson Lecture, Woods Hole Oceanographic Institution, USA, 14 June 1991, p. 3. Although there is debate as to the extent anthropogenic climate change has influenced recent climatic impacts, there does seem to be agreement that it has at least contributed. Hurricane Katrina is a good example of a weather event that may well have occurred without anthropogenic
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influences, but was likely to have significantly increased in severity due to the impact of global warming. BL Preston and RN Jones, ‘Climate Change Impacts on Australia and the Benefits of Early Action to Reduce Global Greenhouse Gas Emissions Useful or Prudent Policy Objective’, CSIRO, February 2006. James Hansen et al, ‘Target Atmospheric CO2: Where Should Humanity Aim?’, The Open Atmospheric Science Journal, vol. 2, 8 April 2008, www.columbia.edu/~jeh1/2008/TargetCO2_20080407.pdf ibid. W Maslowski ‘Causes of the Changes in Arctic Sea Ice’, AMS ESSS Seminar, 3 May 2006; W Maslowski, J Clement and J Jakacki, ‘On Ocean Forcing of the Arctic Climate Change’, Geophysical Research Abstracts, vol. 8, 05892, 2006; Revkin, ‘Retreating Ice: A Blue Arctic Ocean in Summers by 2013?’, International Herald Tribune, 1 October 2007, www.iht.com/ articles/2007/10/01/news/environ.php; Working Group I to the Fourth Assessment Report of the IPCC, Climate Change 2007: The Physical Science Basis, IPCC, Cambridge University Press, Cambridge, United Kingdom and New York, USA, 2007. This report states that summer sea ice is projected to disappear toward the end of the twenty-first century; Department of Climate Change, Green Paper: Carbon Pollution Reduction Scheme, July 2008, p. 58. Garnaut, p. 15. European Environment Agency, ‘CSI 013: Atmospheric Greenhouse Gas Concentrations: Assessment’, April 2008, http://themes.eea.europa.eu/ IMS/IMS/ISpecs/ISpecification20041007131717/IAssessment 1201517963441/view_content Hanson et al. David Spratt and Philip Sutton, Climate Code Red: The Case for Emergency Action, Scribe, Melbourne, 2008. Winston Churchill, The Second World War, Volume 1: The Gathering Storm, Mariner Books, New York, USA, 1986. Point Carbon, ‘Carbon Point Study Estimates Global Carbon Market Could Top $3 Trillion by 2020’, Triplepundit, 27 May 2008, www.triplepundit. com/pages/carbon-point-st.php Garnaut. ibid.
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Student Visions of the Opportunities Beyond Carbon
Opportunities and Carbon Joel Amos I realise that being a year twelve high-school student, I am obviously not in the best position to lecture on the specifics of climate change. But whether we have fifty, thirty or ten years to fix our habits, I know that one thing remains the same: we need to do something. There has been some doubt concerning climate change, some of it quite convincing, but the current consensus seems to be that unless we do act soon, a lot of us will be in a lot of trouble. And it seems as though we’re already experiencing the first of it. If we accept that climate change is real and happening, as our government has, then I do not understand why we haven’t done anything about it. There are countries in the world that run entirely on renewable energy—yes it’s more expensive, but ultimately when oil runs out most of us will need to do the same anyway, and the cost is far less than the cost of the failed crops and flooded plains that we may get in the worst-case scenarios of global warming. And as the developing world begins to burn more and more greenhouse gases, surely it is the responsibility of those that are able to do all we can to ensure that all people can eventually have access to renewable energy.
Western nations have had a huge advantage in that they have industrialised using fossil fuels—a cheap, easy and very efficient way of doing things—when their populations were nowhere near what they are today. But for India, China and the rest of the developing world, to do the same would release a much larger amount of CO2, so surely it is only fair that the West should share the rewards of its head start for the good of everyone. But switching to green energy can do more than just solve the greenhouse problem. There may well be other opportunities also. Historically, whenever a crisis has required new technology, the advantages this grants can be spread across all sorts of fields. For instance, RADAR was developed to locate Nazi aeroplanes, and Sonar to locate submarines, but both are still immeasurably useful in non-military contexts. I have no doubt that with the technological advancements necessary to combat climate change will come an array of other advantages. Through studying climate change, we have already come to a greater understanding of the world’s climatic and weather systems, and new means of generating electricity could lead to the potential for new applications of electricity and other technology. Already, research into potential solar panels has led to some advancements in nanoscience that may have medicinal applications. In addition, preventing the release of greenhouse gases will also solve other problems—air quality, an especially relevant topic during the 2008 Olympics, and acid rain, and many others. We have the necessity to do something now, and there may be small financial strain, but with change shall come knowledge and who knows what else, and the alternative is much worse. Joel Amos is a Year Twelve student at Prince Alfred College, Adelaide
The Mix Creator By Jack O’Brien The mix creator is used to mix any DNA to make any creature. There are two types you can get: the pocket insect creator and the 30 metre by 30 metre animal creator. The control box is to type in what you want to make. For example 57709428 is a queen bee. I came up with
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one creature that I called the carperchong (car-per-chong). I came up with it while I was thinking about climate change. You don’t even need to buy it food because it survives on carbon dioxide, and there is no need to worry about methane emissions.
Jack O’Brien is a Year Six student at Prince Alfred College, Adelaide
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A Change in Mentality By Lucas Lovell Every day we read newspapers, listen to reports, watch news and hear stories; all of which are increasing in attention paid to the climatechange phenomenon that has our worldwide community asking questions and attempting to find the right answers. However, it is looked upon as though these right answers are untimely and the truth of climate change is an inconvenience to gratifying the needs of modern day society. It is this mentality that scars our environment every day and pushes our culture to the brink of irreversible outcomes. It is this mentality that has the potential to take the Earth’s control out of our own hands. It is this mentality that must be cracked. Our role as a society is to ensure the future of the environment in which we live and make a push towards bettering the social development and education of generations to come. So is an environmentally-friendly world a fake world? In many ways, the global community is struggling to understand the benefits and opportunities that could arise from a social adaptation towards living carbon neutral. The general attitude towards climate change among the current global population is that the seemingly insignificant things will have no effect, and that for a change to occur, a worldwide paradigm shift will have to be approved. Yet is it this exact reason that contains its own answer? With a global alliance, the insignificant become significant, the questions become answers, each individual gains the power of seven billion, and the world becomes a place in which healthy lives can be pursued. However, importantly, it must be understood what effects that such a paradigm shift could have on the worldwide economy and universal social development. There are many opportunities that lurk, waiting in anticipation to flourish with a shift towards environmentally-friendly living. The climate-change enterprise is a multi-billion-dollar industry that could potentially develop just as much for economies as could be lost, creating opportunities for young entrepreneurs to break into markets with ground-breaking ideas. Many markets and businesses will be replaced by other businesses that offer cleaner alternatives to meet the same needs. For example, the fossil-fuel industry may begin to falter as the markets
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for wind energy, solar power and other non-emitting energy sources begin to flourish. However, this could cause problems, as the power of the fossil-fuel markets is so substantial that it could potentially disallow the movement towards alternative businesses. For this reason, in order to ensure market power, we may see these larger companies offer greener, alternative energy sources to satisfy the demand of the community. Nevertheless, this change in goods and services being produced will give others the opportunity to present new ideas and revolutionary ways of ensuring the wellbeing of life on this planet. A shift in acceptance towards these new ideas has recurrent effects through the education and attitudes that the coming generations hold. One of the major problems with the current situation is that global community is not educated enough to fully understand the impacts of climate change and the opportunities they have to overcome the issues. Only recently has much attention been paid to educating the next generation of leaders of the ways in which global warming can affect economies and social development. Nowadays, the facts, figures and impacts are readily exposed to children in schools and those participating in educational programs. Despite this, however, the mentality of people is yet to be challenged, with many succumbing to the thought of their insignificance and inability to make a change as an individual. With an economic shift towards businesses that show certain attitudes towards the preservation of the environment, the youth of today will begin to understand the attempt for a global paradigm shift and act upon their belief. This is what was referred to as the ‘cracking’ of such mentality—a global alliance formed through the alteration of viewpoints and attitudes. Importantly, an attitude that reflects the preservation of Earth’s pristine environment will encourage positive social development and influence greatly the quality of life. For example, a greater environmental awareness could see the decrease in use of cars and increase in the use of physical means of transport such as walking or cycling. Socially, this could see worldwide decreases in child obesity and influence the awareness of healthy living. Furthermore, a better understanding of the effects of climate change will better the knowledge of the worldwide community regarding the importance of the environment and plantation of natural vegetation. For this reason, we may notice an increase in the development of parks and places in
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which people can gain a stronger understanding and more effectively engage with their surrounding environment. Increasing the level of plantation will further contribute towards making our planet carbon neutral and developing the world into a place that reflects an understanding and appreciation of its environment. The truth of climate change is a reality that must be accepted by our current society, and continue to be by the next and future generations. Every day, the people of our world ask questions and ponder ways to counteract this global phenomenon without it affecting the way of life that is current to our society. It is the fear of a changing society and the feeling of insignificance within our world that is disabling a sense of cohesion towards fighting the issue. It is the ‘cracking’ of this mentality and an increased appreciation of environmental sustainability that will develop humanity into a race that lives intimately and has a strong understanding of the issues, solutions and opportunities from climate change. Lucas Lovell is a Year Twelve student at Prince Alfred College, Adelaide
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The Looming Peak Coal and Peak Phosphate Crises Disaster or Opportunities for Innovation? Professor Barry Brook and Stewart Taggart
As if ‘peak oil’—the point at which half of the available oil has been squeezed out of the surface rocks—wasn’t enough, there are now two other freight trains thundering towards us and picking up pace: ‘peak coal’ and ‘peak phosphorus’. Neither has got the attention yet of ‘peak oil’, but both have implications just as huge. ‘Peak coal’ could make carbon capture and storage investments a disastrous waste of money. ‘Peak phosphorus’ could mean the agricultural ‘green revolution’, which now supports a hungry world of 6.5 billion and growing, could be hitting its limits. ‘Peak coal,’ ‘peak phosphorus’ and ‘peak oil’ are scary prospects tied to resource limits. Energy and food underpin all civilisation as we know it. To put it bluntly, we need a profound reassessment of how we do business on planet Earth. Every day, evidence accumulates that our global resource wallet is progressively emptying of cash and becoming filled with only over-extended credit cards. Resource bankruptcy looms, and it’s going to force change, whether we want it or not. With wisdom, we can sidestep the freight trains. With denial, profligacy, short-term thinking and delay, we’ll be stuck on the rails, with an inevitable and ugly collision due within as little as a few years or at most a few decades. The decision is ours.
Happily, there’s a good-news story in all this. If we unleash the inspirational human ingenuity that took us to the moon, decoded the genome and has kept the computer industry tracking against Moore’s Law (a doubling of processing power and halving of costs every 18 months) for more than 30 years, then we have a great chance of solving humanity’s accumulated environmental problems. But it will take a sustained burst of collective creative effort, supported by the right incentives and policy levers, especially early on in the ‘breakout’ period. Mankind has science. Mankind has innate inquisitiveness. Mankind has a collective species will to survive. All three can help solve climate change—once mankind gets moving. Every day, foot-dragging global-warming minimalists are confronted with ever more detailed evidence the planet is heating up and that this is having serious, real-world consequences. It has profound implications for everything from storm intensity to rainfall patterns to sea levels. Coupled with the likelihood we’ve reached the peak of global oil supplies, this underscores the need for transformative change. Yet now, another piece of the ‘need for change’ puzzle is falling into place with unexpected pace: peak coal. For a global energy resource that currently provides the majority of the world’s electricity, the data on how much coal the world really has is shockingly poor. While Australia and the United States have large and credible reserves, data on recoverable coal reserves in places like China and elsewhere is at best highly unreliable. For instance, reported Chinese ‘reserves’ are now the same as they were in 1992, despite decades of intensive mining and exponential growth in coal extraction, making the numbers about as believable as industrial production figures were under communism. Researchers from the Germany-based Energy Watch Group conclude that, properly adjusted for ongoing consumption and deflating for dodgy numbers, the world could hit a ‘coal crunch’ as early as 2020—that is, in just 12 years. If this happens, big coal-consuming countries like China could be left with limited options, particularly if they spend the next decade opening one new coal-fired power station a week. If this happens, and global coal supplies start becoming tight, it’s easy to imagine social and political upheaval emanating from, but not limited to, China. This could lead to massive global economic dis-
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ruption and a ‘scramble for coal’ that could mirror, or perhaps be worse than, the current ‘scramble for oil’. There are two key implications of peak coal that have direct bearing on decisions being made about future energy supply. The negative implication is that if huge investments are made in so-called ‘clean coal’ (carbon capture and storage: CCS) technology in coming decades, then the technology might become ready just when the supplies run out. This would be a monumental waste of money and opportunity. Secondly, if coal reserves are indeed as low as many now fear, especially within intensive-use geographical areas such as China and India, then a global resource crunch in coal could lead to a run on Australian and American reserves. Queues of coal ships already stacked up off Newcastle in New South Wales could double or triple. But the boom would be short-lived. While Australia and the United States would enjoy short-term bumper export premiums on coal, transport bottlenecks would force massive change in consuming countries. Given that by 2020 many renewables will be cheaper than coal anyway (based on current cost-reduction curves), the result could be wasted investments in coal and wasted time in implementing large-scale efforts to combat climate change. The result? Short-sighted coal-consuming nations that failed to take into account peak coal could ‘pay twice’ for energy. In this case, the global economic system will self-correct, but not without maximum economic pain. That’s just not sensible risk management. Already, the signs are there. In 2004, the World Energy Council reclassified 99 per cent of Germany’s coal reserves to ‘speculative’ (they were formerly listed as ‘proved recoverable’). The German government’s own figures, released in 2005, reinforced this conclusion. During 2008, China, the world’s largest coal producer, became a net importer of coal, despite digging up its own domestic reserves as fast as it can. Eighty-five per cent of all global coal reserves are located in just six countries: the United States, Russia, India, China, Australia and South Africa. Only the United States, with the world’s largest reserves, and Australia, are believed to have fully credible numbers. China has not revised its reserve levels for more than fifteen years, despite production figures indicating that at least 20 per cent of those reserves have been mined since then.
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Against this backdrop, we would be sensible to hold back on major new investments in coal—particularly CCS—at least until global coal resources are more credibly proven. It would be tragically ironic folly to invest heavily chasing a carbon capture and storage ‘rainbow’ at great cost and in preference to the large-scale development and deployment of renewable energy sources, only to create a technology that can never be used because there’s insufficient underlying fuel. The coal industry has had decades to lift its game in reporting reserves. The fact that it hasn’t, along with the fact that it hasn’t made sufficient investment in greenhouse-gas mitigation even though this problem has been brewing for years, shows either lack of imagination or deliberate stalling. This augurs poorly for CCS as a future technology fix. Furthermore, if the world faces a forced shift away from coal, investment should flow to energy sources where supply is most certain and perennial: solar, wind, wave and geothermal. The Earth has been sunny, windy and internally heated for billions of years now, and the ocean swell is so very consistent. It will remain so for billions more. The second disturbing resource crunch mankind faces is rapidly depleting supplies of phosphorus fertiliser. Phosphate is a crucial input to the agrarian ‘green’ revolution that created higher crop yields which in turn has allowed Earth’s population to reach 6.5 billion people. Science-fiction writer Isaac Asimov once referred to phosphorus as ‘life’s bottleneck’. By that he meant it was a linchpin input to life and a scarce one at that. The problem is that, like many environmental resources, mankind is rapidly using up the resource. Traditional sources of phosphorus, such as guano and rock phosphate, are becoming depleted. Without a suitable and economic replacement, global agricultural output could plummet. This looming crisis could destabilise global society all by itself. Coupled with energy scarcity by a misguided reliance on coal, it could, to put it bluntly, create global chaos. The good news is that, as with renewable energy, smart people are getting to work on this problem. Solutions you may hear more about in this area include things like ‘biochar’ and, more esoterically, ‘human urine’. Sea water is another potentially massive source, but
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extraction of phosphorous in this way is hugely energy intensive, which means that we need cheap, clean energy too. Consider biochar, a form of black carbon. Using inputs of many different kinds of biomass and then chemically decomposing them in a low-oxygen environment (called ‘pyrolysis’), an energy fuel similar to hydrogen (called ‘syngas’) is created, alongside a separate byproduct similar to charcoal, which can act as a long-term storage medium for carbon. The result could be a two-for-one deal in which we get both an energy fuel and a carbon-reduction tool through biochar sequestration. There is also evidence that it improves the retention of soil water and associated nutrients, including lowering the amount of fertiliser input that’s required. See the synergy? Then there’s human urine. Believe it or not, it’s a huge source of phosphorus. In Sweden, some public toilets and private homes already separate out urine for use on farms. This could provide a large, ongoing supply for agriculture. But the question is: How do we adapt our consumer behaviour to see urine not as waste to be treated, but as a key resource to be recycled? Ever since the advertising industry was created in the early twentieth century to dispose of surplus industrial production created by the advent of assembly lines, the result has been the creation and fostering of often unnecessary consumer demand. This, in turn, led to the twentieth century throw-away consumer society, as humanity has concentrated on the front end of industrial production and not the back end of waste minimisation. The result of this laxity has been squandered resources, huge garbage tips and billions of plastic bags, among other ills. In addition to changing our consumer habits, we need to start thinking about ‘waste’ as a resource, whether for turning biomass into carbon-storing biochar or urine into fertiliser. We are entering a period of profound change. Traditional resource depletion is going to force changes in behaviour. The better we anticipate and manage the transition, the less dislocation there will be. Clearly, the first thing we need to do, as a society, is recognise the problem and get on a crisis footing. It’s called transformative planning, not business as usual. In that respect, we’ve already made a lot of progress. Minds are focused. Now we need to put those minds to work coming up with answers like biochar carbon storage and
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urine fertiliser. Moreover, we need to put in place the policy levers and incentives to drive rapid and large-scale uptake. In his speeches, Professor Ross Garnaut, architect of Australia’s carbon-trading scheme, notes that in the first few years of the twentyfirst century mankind created more goods and services than in all of previous human history combined. Everything to do with human economies seems to be growing exponentially. He also notes that recent years have brought the greatest increase in world wealth ever. But with this economic growth and wealth has now come the realisation that we’ve got a lot of things wrong. History, experience and common logic tell us that perpetual growth is a myth, at least if it is predicated on the continued exploitation of finite resources, such as fossil fuels, minerals or environmental services. For the party to continue, we need to fix the plumbing. Otherwise the toilet is going to overflow into the living room, and everyone will have to live with the mess. Harnessing creative brainpower is the answer. Arresting global warming need not drag us backward. Instead, it could lay the collective groundwork for a new ‘knowledge revolution’ that could be the springboard of an entire new era of global wealth creation and a leap to new levels of development for human civilisation. Given that we are renters, not owners, of planet Earth, this is a ‘smart tenant’ program, for all generations and all species. It’s been a mere 150 years since Charles Darwin offered evolution as an alternative to creationism as an explanation of life’s diversity. Since then, we’ve developed astounding new theories and applications in everything from physics to medicine. We’re a highly sophisticated, powerful species—perhaps unique in the galaxy in terms of our achievements. We’re moving ahead on many fronts in harnessing nature, but we’re moving backward on one—a big one. What we need now is focus. The threat of catastrophic global warming is giving us that focus. If we pay attention, we’ll be far better off.
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Australia’s Emissions Contribution Does It Matter? Dr Monica Oliphant
A common argument against a ‘go-it-alone’ Emission Trading Scheme (ETS) for Australia is that as we contribute only 1.2 per cent to the world’s CO2 emissions. Anything we do to cut our emissions would have little impact, especially if India and China do not reduce theirs. The contrary argument is that as Australia is the world’s third-highest per capita carbon emitter, we have to move quickly to reduce our emissions. This chapter looks at the relative importance of our emissions per capita and total emissions. In addition since Australia is a large exporter of resource emissions, the chapter also looks at emissions embodied in international trade, ‘carbon leakage’—the effect of shifting emissions from one country to another with potentially no global benefits—and what accounting for these may mean to energyintensive industries, and generally, post-Kyoto.
Per Capita Emissions Figure 1 displays CO2 emissions per capita for a selection of countries. The actual emission figures vary from different sources but, irrespective of the source, Australia is always close to the top of the list. As Figure 1 shows, average world emissions in 2004 were approximately 3.8 tonnes of CO2 per capita. Using current population growth-rate predictions, the conservative Intergovernmental Panel on
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Source: World Bank, online database, 2004, http://maps.grida.no/go/graphic/national_carbon_dioxide_co2_emissions_per_capita
Figure 1: World CO2 emissions per capita.
Climate Change (IPCC) target of between 350 to 450 parts per million (ppm) for stabilising emissions in the atmosphere in 2050 would require a reduction to 3.3 tonnes of CO2 per capita or less. India and China’s emissions are currently below this value, although are growing steadily. Australia and the majority of the developed world are well above. To reach the 3.3 tonne target, Australia and other developed countries will have to use energy much more efficiently in all aspects of development and production, reduce unnecessary consumption and rapidly adopt renewable forms of energy.
Total CO2 emissions. At face value, the argument that Australia should not act precipitously because it is only responsible for 1.2 per cent of the world’s carbon pollution is a compelling one. However, the argument fails to acknowledge that 90 per cent of the world’s 205 countries individually contribute less than 1.2 per cent to the gross total, that Australia is in the top 10 per cent, and is the eighteenth-highest polluter in the world.
Figure 2: Country emissions 2004. Source: Millennium Development Goal _MDG_ Indicators, http://mdgs.un.org/unsd/ mdg/SeriesDetail.aspx?srid=749.
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Source: Millennium Development Goal _MDG_ Indicators, http://mdgs.un.org/unsd/mdg/SeriesDetail.aspx?srid=749.
Figure 3: Cumulative per cent emissions from the 185 lowest emitting countries.
Figure 2 shows cumulative emissions from the top twenty emitters that make up 80 per cent of world emissions.1 According to the Millennium Development Goal (MDG) reference, in 2004 total world emissions were 27.25 gigatonnes of CO2, with China and the United States making up approximately 42 per cent of the world total. (At the time of collecting data for this graph, United States total emissions were greater than China’s. It is believed that the reverse is currently the case.) If the EU is added in, these three population centres contribute around 53 per cent to world emissions. (The EU figures are not used in the cumulative per cent graph from here on because the individual EU countries are listed instead.) Of the remaining 185 countries, seventy-three make up 18 per cent of world emissions and 103 the last 2 per cent. The figure is stunning: a little over one-third of the world’s countries make up 98 per cent of emissions, and two-thirds make up 2 per cent (Figure 3). Of course some of the countries that make up the 2 per cent of emissions are quite small. However, since only thirteen countries individually produce more than 1.5 per cent of world emissions, if all the rest said ‘we have little impact so why should we do anything’, nothing would happen. This is not to deny that the world’s two largest polluters, the United States and China, have a substantially greater responsibility to reduce their emissions. (With a population of 1.13 billion, fifty-five times that of Australia, India is currently only responsible for 4.9 per cent of world emissions, still a long way behind the United States and China, despite increasingly rapid growth.)
Emissions Embodied in International Trade and Carbon Leakage In order to mitigate the impact of greenhouse-gas emissions on our climate it is important to know where the major sources of emissions come from so that an effective emissions-reduction program can be put in place. One such large source that is often overlooked is the emissions released during the production of internationally traded goods and services. A recent study has shown that 5.3 gigatonnes, or nearly 20 per cent of global emissions, are transferred between countries during such trade (see reference in Figure 4). Developed countries have become net importers of the emissions and developing nations net exporters—that is the former have
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shown a shift towards imported goods and away from domestic manufacturing. This means that many countries are ‘outsourcing’ their greenhouse-gas emissions and not accounting for them in their national totals. The issue of outsourcing whereby emissions are shifted from one country to another with no net reduction in global emissions is getting increasing attention worldwide. How to apportion the emissions from internationally traded products to their rightful owners is quite difficult and contentious. To get a feeling as to how emissions from traded goods are growing can be inferred from Figure 4 that shows how, since 1990, growth in trade has outpaced population and escalating consumerism.
Figure 4: Rising world gross domestic product (GDP), trade and population. Source: Glen P Peters and Edgar G Hertwich, ‘Trading Kyoto’, Nature Reports Climate Change, 20 March 2008.
It is interesting to look at the two major emitters: the United States and China. Work by C Weber and H Scott Matthews showed that though the United States was responsible for producing 22 per cent of estimated world emissions in 2004, the amount it was responsible for consuming was about 25 per cent. 2 On the other hand, according to the Tyndall Centre, China imported 381 megatonnes of CO2 in traded products and exported 1490 megatonnes in 2004.3 The difference of 1109 megatonnes of CO2 accounted for 23 per cent of China’s CO2 emissions that year. Since that time, exported emissions have grown steadily, and though more recent emissions figures are not available, China’s trade surplus has
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grown from $32-billion in 2004 to $177-billion in 2006, which implies quite a significant increase in exported CO 2 is likely to have occurred.4 In the case of the United States, the positive difference between consumed and produced emissions is said to be due to increased trade together with a shift towards more carbon-intensive trading partners. In China the negative difference is due to the relatively high levels of carbon intensity in the Chinese economy and high demand for China’s cheap goods and labor. Figure 5 shows, for a selection of countries, the CO2 emissions embodied in exports and imports as a percentage of produced emissions for the year 2001.
Figure 5: Carbon-dioxide emissions embodied in exports and imports are shown as a percentage of total domestic emissions for 2001. Source: Glen P Peters and Edgar G Hertwich, ‘Trading Kyoto’, Nature Reports Climate Change, 20 March 2008.
The United States, Japan, Germany, the UK, France, Italy and Korea—all regarded as developed countries—have much higher
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import than export emissions as a percentage of domestic production. On the other hand the reverse is the case for China, India, the Russian Federation, Australia and South Africa, who, according to the IMF are emerging and developing economies—except for Australia which is recognised as a developed nation. However, Australia and all the others in this second grouping, except for China—the ‘manufacturing hub’ of the world—are large exporters of carbon-based resources. Nevertheless, Figure 5 demonstrates that, in the main, import emissions exceed export emissions for developed countries but export emissions are greater than imports for developing economies. Figure 6 shows a similar type graph, but for the AP6 (AsiaPacific) trading block.
Figure 6: Export and import emissions for the AP6 countries. Source: Glen P Peters and Edgar G Hertwich, ‘CO2 Embodied in International Trade with Implications for Global Climate Policy’, Environmental Science & Technology, vol. 42, no. 5, 30 January 2008.
It has been shown that international trade can have an impact on country emissions and it can even be conjectured that if the emissions intensity of local power generation goes down but imports from carbon-intensive trading partners go up, there could be no net
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emissions change. Data required to quantify or model impacts is not always easy to come by nor is there consensus that the way carbon leakage is currently defined is the correct way. It is certainly time for a consistent data-collection methodology to be put in place.
Carbon Leakage and the Kyoto Protocol The IPCC defines emission leakage as arising when carbon-abatement actions by countries cooperating in the Kyoto Protocol cause emissions in other countries to increase. This could occur during a production shift of carbon-intensive goods by participating countries towards production in non-participating countries. (The outcome may only be a relocation of emissions rather than a global reduction.) The Kyoto Protocol was set up so that countries that have ratified it are responsible solely for reducing emissions within their national borders and the IPCC only considers carbon leakage that results from the Kyoto Protocol. However, the growth of export-related emissions, especially in China, is not only due to the Kyoto Protocol impacts but also to low labour costs, favourable (non-CO2) environmental laws, exchange rates and so on. Therefore it is suggested that a broader definition of carbon leakage is needed that considers all export-related emissions and not just those associated with implementing the Kyoto Protocol. The alternative—and more policy-relevant—approach to carbon leakage is to quantify all emissions generated by each country in the production of goods and services that are traded internationally: the total ‘emissions embodied in trade’. This measure considers all supplychain emissions during the production of exports, from assembly to transportation. Defined this way, carbon leakage constitutes all emissions embodied in exports from countries without emissions constraints to those with constraints, and it is independent of the cause of increased emissions, unlike in the IPCC definition. Consequently, post-Kyoto, in 2012 there could well be a need to look for alternatives to national targets—perhaps industrial sector targets, product labelling schemes and so on with all emissions generated by each country in the production of goods and service that are traded internationally being looked at. It is an understatement to say this will be a challenge.
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Carbon Leakage, Emissions Trading Schemes and Industry Reaction I return to the current definition of carbon leakage and an examination of how it is being used in emissions trading schemes. The ‘fear’ of carbon leakage is the main reason why emissionsintensive trade-exposed industries (EITEs) have asked for protection from full exposure to the ETS in Europe and the Carbon Pollution Reduction Scheme in Australia.5 The sentiments expressed by EITEs in both the EU and Australia are virtually identical. They claim that once the scheme is in place they will be confronted with higher costs that they may be unable to pass on since they will be faced with prices set in international markets and will compete against firms that do not, at this stage, have comparable carbon constraints. Therefore in the absence of assistance, if constraints on emissions are placed on activities in Australia/ EU but not elsewhere, there is a possibility that some EITEs may need to relocate (or new investment could be discouraged). If these EITEs choose to relocate in a country with less-stringent climate-change policies, with no consequent global reduction in emissions, then there is no global benefit and ‘carbon leakage’ occurs. Consequently, in Australia, the government proposes to address the problem of potential carbon leakage by providing an extensive EITE assistance program.6 The initial rate of EITE assistance proposed at the time of writing is as follows: •
•
Ninety per cent for activities with emissions intensity of at least 2000 tonnes of CO2e per $1-million revenue, or 6000 tonnes of CO2e per $1-million value-added. Sixty per cent for activities with emissions intensity between 1000 and 1999 tonnes of CO2e per $1-million revenue, or between 3000 and 5999 tonnes of CO2e per $1-million value-added.
In Europe, EU leaders have promised to protect EITEs by possibly giving them up to 100 per cent free carbon allowances in the post-2013 CO2 emission-trading period. This recommendation has led one Greens MEP (Member of the European Parliament), Claude Tumes, to suggest that carbon leakage is a myth and that industries are pushing for free permits on
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the basis of faulty claims. He has stated that, ‘some of the world’s most energy-efficient and environmentally-sustainable cement and steel factories are being built outside the EU’, and argues that ‘all new investments in the energy intensive industry—in Brazil, in Kazakhstan or in China—are always more energy efficient than old EU production processes’.7 Nevertheless there is reason to assume some relocation due to an ETS could occur, but the extent is not at all certain. Figure 7 from a Netherlands 2004 report indicates that global production of energyintensive goods from industrialised countries has been steadily going down over the last thirty years. This decline has certainly not been due to an ETS, more likely it is due to a search for cheaper labour, countries with less-stringent environmental policies (other than CO2) and distance from trade centres.
Figure 7: Global production shares of energy-intensive products in industrialised countries. Source: JPM Sijm et al, ‘Spillovers of Climate Policy—An Assessment of the Incidence of Carbon Leakage and Induced Technological Change Due to CO2 Abatement Measures’, , Netherlands Environmental Assessment Agency, September 2004.
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During the 2003 Mandatory Renewable Energy Target (MRET) review process, submissions were received from energy-intensive industries seeking exemptions from MRET. Their arguments were very similar to those given in opposition to the ETS and Carbon Reduction Pollution Schemes.8 However, despite the prognostications of industry, after seven years of the MRET there is no evidence of a negative impact on competitiveness, nor has industry moved offshore to avoid it. Industry will always oppose change and additional costs, irrespective of the merits of the proposed changes. The aim of governments should therefore be to develop policies that are in the best interest of all, and in the particular case of carbon emissions, to introduce strategies that are consistent with a rapid transition to a low-carbon economy.
Conclusion Although our responsibility for 1.2 per cent of global emissions seems small, it is not. In both gross emissions and emissions per capita, Australia is in the world’s top 10 per cent. As a large exporter of carbon-intensive resources we could be affected more than most by post-2012 Kyoto targets, especially if national emission responsibilities are required to go beyond national borders. At some stage the apportionment of emissions from internationally traded goods and services to their rightful owners will be addressed by the international community. The process will be difficult and contentious, but it would be better for Australia to be part of this process than not. The need for incentives for energy-intensive industries should be looked at more carefully to determine what threat, if any, ‘carbon leakage’ poses to Australia. Together with other developed nations, Australia has a responsibility to take a lead in finding a way to move rapidly to a low-emissions future. This can be done by developed countries taking the lead in reducing emissions, since they have historical responsibility for the majority of the carbon emissions plus responsibility for more recent emissions growth in the developing world and expanding efforts to help developing countries to reduce their carbon emissions through technical assistance and finance. It is important not to loose sight of the fact that, whatever schemes are put in place, the overall goal is to reduce global
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greenhouse-gas emissions while increasing the world standard of living. This may not be possible if the world continues to rely on carbon-intensive industries. The only real way to achieve carbon reduction and a higher standard of living for all countries is by increasing efficiency, and a rapid transition to a renewable-energy future. In the coming years, enormous opportunities will be secured by companies that manufacture renewable-energy products, and to companies that manufacture products using renewable energy.
Notes 1 2
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The data considers only carbon-dioxide emissions from the burning of fossil fuels, not by deforestation or other sources. C Weber and H Scott Matthews ‘Embodied Emissions in US International Trade: 1997–2004’, Environmental Science & Technology, vol. 41, no. 14, 2007, pp. 4857–81. Tao Wang and Jim Watson, Who Owns China’s Carbon Emissions?, Tyndall Centre for Climate Change Research, 19 October 2007. The relationship between emissions consumed and produced in a country: [Emissions Consumed = Emissions Produced + Emissions Embodied in Imports – Emissions Embodied in Exports] OR [(Consumed – Produced) Emissions = Emissions Embodied in (Imports – Exports)]. Carbon Pollution Reduction Scheme, Green Paper, July 2008, www.climatechange.gov.au. Definition of Carbon Leakage: ‘The effect when a firm facing increased costs in one country due to an emissions price chooses to reduce, close or relocate production to a country with less climate change policies’. Information on which can be found in detail in vol. 2 of the CPRS, White Paper, www.climatechange.gov.au/whitepaper/report/index.html Claude Turmes, ‘Wolf or Sheep? Myth and Realities Behind Energy Intensive Industry Lobby Efforts to Dilute the EU Climate Package’, Euractiv, 12 March 2008, www.euractiv.com See submission 71 from Comalco Ltd to the Mandatory Renewable Energy Target, www.mretreview.gov.au
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28
The Way We Were Looking Back from 2100 Dr John Wright
This is a work of fantasy, nothing more. The storyline: An engineer coming back to Australia from an energy conference overseas, 100 years in the future, musing on discussions with others on how energy, science and technology have unfolded since 2000. It is pure fiction, and relatively conservative, but perhaps it could turn out this way …
Musings The date is the 24 December 2099. I’m flying back to Australia from an energy conference held in Europe, to mark the transition of the world into the twenty-second century. I am musing about the conference and the many discussions held both formally and informally about the amazing pathway that the world has taken on its way to energy sustainability over the past 100 years. These thoughts are prompted by the view from the cabin window as we approach the Australian coast. Below me there is a vast array of checker-like structures floating on the sea. The structures appear intensely black, almost supernaturally so. I know this is because the panels consist of a particular kind of nano-structured material that has the property of virtually complete radiation absorption across the entire solar spectrum. The material also has the
property of using the absorbed solar radiation to directly split water into its components, hydrogen and oxygen. Back in the early 2000s the direct splitting of water by solar radiation was confined to the laboratory with tiny conversion efficiencies and from expensive materials. Over the years, gradual improvements were made until in 2070 a breakthrough came in the development of the absorbent structures combined with relatively cheap materials, to produce hydrogen at very low cost. From that point, the technology was rapidly deployed around the world and the expression ‘the hydrogen economy’ became more than a catchy phrase and was finally a reality. The transformation also had a beneficial effect of dramatically cutting the world’s greenhouse gas (GHG) emissions to the point where, sometime in the next century, we will return to pre-industrial levels of carbon-dioxide concentrations in the atmosphere. So we did manage to escape the dire predictions of the early-twenty-first century that the world was heading towards planetary climate-change disaster. But it was a close-run thing and it is interesting to think back on how it all came to pass.
Simplicity to Complexity (and Back to Simplicity) Back in the ‘olden days’ the world relied on a relatively simple energy mix consisting of coal, gas and oil, with renewables, consisting mainly of wind, hydro and small amounts of solar and biomass, mopping up the remainder of the demand. Due to the emergence of the thendeveloping countries, particularly China, closely followed by India, with their resulting huge additional energy and resource demand, energy prices, particularly oil, increased dramatically and started a period of global economic stress. At the same time, this global increase in energy demand put further pressures on greenhouse-gas emissions, and this twin problem of economics and environment plagued the planet for the next few decades. A global approach was needed and, although there was plenty of talk, individual countries pursued their own goals and world GHG emissions continued to rise. By 2020 the temperature signal had well and truly emerged from the measurement noise and there was enough weather-change evidence to demonstrate to even the firmest sceptics that the world had to combine to combat the problem. So after a couple of decades of interminable climate meetings, finally in
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2020 all counties came together to develop real targets on a collaborative basis. But there was a lot more to this response. Despite the widespread economic dislocation in many countries up to and beyond this point, the period from about 2010 onwards spawned a period of unprecedented innovation, the like of which had not been seen outside war times—and in fact this was a war, one of economic and environmental survival. This period of innovation showed that there were ways of addressing the seemingly insoluble problems by concerted action across the global economy involving all people. With each new success people hungered for even more successes. It became a war against a common enemy—ourselves. During this period to 2050, to combat the high GHG emission intensities of conventional power systems and increasing costs, many modifications, fuel substitutions and system changes were developed and introduced around the world. There was a step change in complexity in the energy and transport industries.
The End of the Oil Age The price of oil was a principal promoter of rapid change as people loved their personal transport, and the market responded accordingly. As the price of oil rose rapidly from 2010, there was fear that the world was seeing the commencement of ‘peak oil’ where the demand would continue to outstrip supply. A report by CSIRO in 2008 warned that, in one extreme scenario in which peak oil commenced in 2010 and response to that event was slow, motorists would face petrol price increases in 2018 of greater than five times the current level. Faced with historically high transport-fuel prices, the industry went into overdrive to develop substitutes. The first large-scale supply was from ethanol biofuels. This immediately ran into difficulties as it set up a competition with food crops and some parts of the world consequently went through a period of restricted food supply. It was obvious by 2020 that this was not sustainable and, showing the first signs of a real global agreement, in 2025, a world moratorium was imposed on the production of fuels from both animal and human food crops. This agreement was assisted by rapid progress in producing ethanol from biomass ‘wastes’ such as woody materials, grasses and the like (the so called
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ligno-celluosic conversion processes), and biodiesel from large-scale algae production in huge bioreactors. These used sunlight, nutrients from sewerage and carbon dioxide from power stations. But even this could not supply the ever-increasing transport-fuel demand. With the price of oil still skyrocketing, the world turned towards the production of liquid fuels from still abundant gas and coal. Huge gas-to-liquid plants were set up in the Middle East to exploit relatively cheap gas, where vast quantities were flared in any case to get at the increasingly scarcer remaining oil. In coal-rich countries the production of liquids from coal commenced (in Australia, China and the United States) and continued (South Africa) into the 2020s. However, both coal-to-liquids and gas-to-liquids processes were GHG-intensive and in order to meet emission targets, pressure built to incorporate carbon dioxide capture and storage (CSS) into the processes. At this stage, the middle to late 2020s, while the technology was proven for coal- and gas-fired power generation, it was still expensive, and competition was building for suitable locations to store carbon dioxide that could not be released into the atmosphere from power generation and other industrial processes such as steel, aluminium and cement manufacture. These fuel substitutes, together with an increased penetration of gas, both compressed natural gas (CNG) for commuter vehicles and liquefied natural gas (LNG) for freight, did hold fuel at an affordable price. It also took a considerable demand response, with people using smaller and more fuel-efficient cars, and a greater demand for improved public transport. Also during this time, battery storage technologies were greatly improved and we saw an increased electrification of the world’s vehicle fleets. This was reflected first in the greater uptake of hybrid cars, a progression to plug-in hybrids, and by 2025 full electric vehicles started to make a significant impression on short-range transport. Once the range problem was effectively solved in around 2040, electric vehicles become the norm, rather than the exception, and signalled the beginning of the end for the oil age. Also at this time, there was rapid decarbonisation of the power industry through CCS and increased renewables, and this put downward pressure on energy GHG emissions. It seemed an ideal solution. Also, in the early 2040s a robust, cheap fuel-cell breakthrough was achieved which was a huge step towards the hydrogen economy—an
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affordable hydrogen-powered vehicle, although we had to wait another decade for the mobile hydrogen-storage problem to be solved to institute a major switch to these cars. And of course we were still waiting for the hydrogen infrastructure to catch up as hydrogen production was still relatively expensive. Thus in the 2050s we had a rich mix of transport fuels from which to choose—still some oil-based fuels, hybrids running on a variety of oil and biofuels, CNG and LNG vehicles, full electric cars and increasing numbers of fuel-cell cars keeping pace with the expanding hydrogen distribution and storage network. So we managed to keep our personal transport albeit at a higher cost, but it did little to solve road congestion which was still a curse. However, this was an increasing pressure on society, and spending gradually increased on ‘nation building’ exercises to improve public transport. In Australia this was reflected in the resurrection of the very fast train (VFT) scheme on the eastern seaboard and the construction of a Sydney and environs surface-integrated underground rail system along the lines of the improved London and Toronto systems. But all this depended largely on the production of cost-effective, low-emission electricity.
The End of the Coal and Gas Ages In the early 2000s, over 80 per cent of Australia’s electricity came from conventional coal-fired power with the remainder from gas and a small contribution from renewables (mainly large-scale hydro). Because of the nature of the water supply and the land, there was little likelihood of the development of additional hydro power and the politics and people’s attitude at that time precluded the consideration of nuclear power—even though Australia was the largest exporter of uranium and had close to one-quarter of the world’s known resource. It was little wonder that on a per head of population basis, Australia had a high carbon-intensive economy. This was perceived as a risk, particularly from our trading partners that had carbonreduction schemes in place. As a result, long-term carbon-emission targets were set along with the imposition of a ‘Carbon Pollution Reduction Scheme’ designed to increase the cost of products from carbon-intensive industries to encourage more efficient and changed
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technologies. This caused great controversy regarding protection of ‘international trade exposed’ industry, protection of jobs, and potential destruction of parts (or all) of the economy by going it alone without a world scheme in place. All this went away of course in 2020 when the world was at one on the environment/economic issues. But it was a problem in 2010. The Australian coal industry and the local power generators had plenty of warning of the need to restrict their GHG emissions and had several pilot and demonstration programs running through 2010 to 2020, capturing and storing carbon dioxide in deep geological formations. These activities showed that the technology worked, but it came at a cost and of course the end consumer had to foot the bill. Throughout this period, the cost of carbon emissions progressively increased through the ‘carbon pollution’ legislation and the CCS actions taken were shown to offset this added cost. And it had its desired effect to adjust relativities between various technologies. For example the upwards cost of the two new full-scale coal-fired CCS plants built in 2018 approached that of power from wind. From this point on there was a dance around the cost effectiveness of the competing technologies as improvements through process learning, new materials and engineering innovations reduced the costs of all technologies. And this technology ballet has continued to the present day. Of course it was always known, if not explicitly acknowledged, that CCS was a transition technology to allow time and technology for society to adjust, particularly in Australia, from fossil fuels to less carbon-intensive technologies and systems. However, this transition lasted for fifty years or more, and it became absolutely necessary to retro-fit the emissions from Chinese coal-fired power plants that were being built with a frequency of one per week in the period 2006 to 2015. In fact the technology was so successful, the only downside was the increasing need to transport carbon dioxide ever increasing distances from the point of generation to store the billions of tonnes that were captured in the 2040s. This, in the end, was a limit to CCS and this, combined with breakthroughs in renewable-energy technologies commenced the gradual reduction in coal-fired power with the last of the world’s plants closing in the 2070s. This was not the end of coal, as it is even now a valuable source of chemicals and other materials, it is just not produced at anywhere
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near its previous consumption rates. Gas at this stage was far too expensive for power generation and the last gas power plant closed a decade before. Its use in transport continued, but at an ever decreasing rate.
The Renewables Age Meanwhile the growth in renewable power continued strongly throughout the entire period buoyed by costing in a carbon-emissions price. In Australia, wind power increased at a slow, but steady rate and geothermal energy was proven in the late 2010s, with many installations built close to population centres and boosted by ever more efficient low-grade heat-utilisation technologies. Solar thermal installations also rapidly expanded as engineers developed low-cost collectors and receivers and took advantages of the benefits of component mass production. Initially the solar thermal plants operated only in the day, but as costs came down, thermal storage was added and they became 24/7 power plants. By 2060, 40 per cent of Australia’s power was generated by solar thermal technology. There was also growth in photovoltaic (PV) technologies. Initially based on silicon, over a period of twenty years improvements were made in the efficiency of organic photovoltaics (OPVs or plastic PVs). These started to overtake silicon types in 2030 as OPVs were made from cheaper materials, they were not as energy intensive to produce and they could be turned out at volume using relatively simple printing technology. The modern variants of these first stumbling attempts in the early 2000s are now used as general building materials and every building is a power generator—a 2000 vision that is now reality.
The Nuclear Age? There never really was a nuclear age—a time where power supply was dominated by this technology. In the 2020s there was still a lot of what I would call, ‘nuclear ambivalence’ with some countries planning to install more nuclear plants and others getting out of the technology as fast as they could. This was caused by the great nuclear unknowns— the waste problem was not solved, there were concerns about nuclear material falling into the hands of terrorists and a growing appreciation
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that uranium supplies were limited, and prices were going up. But no technology stayed static and gradual improvements were made in waste-handling, the development of ‘fail safe’ reactor systems and, in the late 2050s, the introduction of thorium-based power generation that had the main advantage that thorium was abundant and widespread and did not produce materials that could be easily used for mischief. Fusion power also continued its slow rate of development but was still not a commercial proposition in the 2050s. Our best use of fusion power was still to use the most reliable reactor, the sun. The new nuclear technologies were rapidly adopted over the next decade for base-load power, but they were never used in overwhelming amounts as improvements in renewable technologies and systems at that stage could more than compete with what was still a relatively expensive technology. When we learned to produce reliable, cheap hydrogen from direct solar water splitting in the 2070s, nuclear power was consigned to a back-up system, supplying the slowly shrinking demand for base-load electricity that has continued to this day.
Artificial Intelligence and the Power Grid At the start of 2000, the growth of China and India catalysed major increases in world GHG emissions. Emissions from both these economies outstripped those of the developed world in the next two decades. There were many international conferences, meetings, gabfests and the like in an attempt to pull the world’s economies together to develop a concentrated, uniform attack on global GHG emissions. Most failed, but the 2020 international agreement did set targets for all countries through an international emissions-trading scheme. To reach the targets, it was obvious (and had been back in the 2000s) that all stops needed to be pulled out and the GHG issues would not be solved by just the development and supply of cleaner energy. There would also have to be massive reductions in energy demand—difficult in strongly growing economies. And it was here that all the developed countries finally took the lead. The concept of ‘the intelligent grid’ started to develop traction in the early 2000s as a response to changed energy-use patterns compounded by increasing power prices and stimulated by pricing carbon emissions. In most Western nations the demand for power became
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more ‘peaky’, that is there were more and higher spikes in demand. This was typified in Australia by the huge increase in the use of airconditioning throughout the 2000s and the effect of whole communities all turning on their air-conditioning units at the same time led to these spikes causing the wholesale price of power to also spike. This did not suit the large, base-load generation and caused a multitude of grid supply problems. Each year additional power had to be brought on line. This was supplied by relatively inefficient gas open cycle plants that operated for less than 20 per cent of the time to supply the peak power. These problems were largely solved over the next two decades by imposing a degree of machine intelligence into the power grid so that loads could be more effectively balanced across the network in times of supply stress (such as heatwaves which occurred increasingly frequently in the 2020s and beyond). With the introduction of ‘smart’ appliances, it was also possible to have two-way communications across the grid to automatically turn off/on or adjust appliance settings to effectively manage grid supply in local, regional and full country power supply. There were some issues about ‘big brother’ control, but these days, everything is automated and works so well that nobody notices. And over the years the intelligent grid has resulted in a reduction of over 50 per cent in energy demand and the reduction continues today. Of course the take up of widespread solarpowered air-conditioning in the 2020s also helped sort out the ‘peakiness’ of the demand in Australia, but that is another story.
Home Again I was jolted out of my musings by the cabin announcement that we were about to arrive at Sydney’s airport. As the airship floated down to its tether point and the passengers bustled preparing to depart, I again speculated on how far we have come with our energy systems and how we have moved, from very early resource concerns in the 1960s (largely overthrown by technology improvements), environmental concerns in the 2000s, the oil shocks around 2010, to the golden era for energy innovation that stemmed from these concerns in the 2020s and continued unabated into the 2080s. It is only now that we are living in a more relaxed age resulting from the innovation and ingenuity of scientists, engineers and
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technicians who have crafted our energy world. And we should not forget the social scientists who assisted to formulate and communicate the necessary changes the global society had to make to avoid the potential disaster the world faced 100 years ago as we struggled with the prospect of the twin evils of seemingly irreversible climate change and resource depletion. We seem at last to be approaching equilibrium with nature— real sustainability. Many of our natural systems are still degraded and will be for some time, but we are at last winning the battle and the fight goes on. And it is a different fight. All people now have sufficient access to clean energy which is now simpler than it has ever been. In Australia, our two main energy carriers are hydrogen and electricity from solar, geothermal and ever decreasing advanced nuclear generation. Every building contributes power to the grid in daylight hours and hydrogen storage provides the rest. All is balanced by smart energy distribution, the like of which was hardly conceived even a few decades ago. The next global challenge is to complete the repair of our ecosystems on the back of an energy sustainable society—no small task, even in 2100.
The Way We Were
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Acknowledgements John O’Brien
This, more than most books, is a collaboration of minds and effort. It would not tell all of its wonderful stories without the extensive effort of many people. Many of these people were consciously involved in the preparation of the book and its ideas. There are however some people who influenced the book’s conception without ever knowing it. We’ll start with the latter. On arriving in Sydney in 1997 and at a loss as to what career to pursue, I spent an afternoon with a recruitment psychologist trying to work out what made me tick. We concluded at the end of the afternoon that I should be an ‘environmental entrepreneur’. Sadly I have no recollection of her name, but it is with thanks that I was steered onto that course. John Harradine from Zaffyre furthered this transition by helping me see what was stopping me achieve this goal, for which I will be forever grateful. Finally, Tim Flannery’s eloquent book The Weather Makers spurred me into action. In some ways, this book, Opportunities Beyond Carbon, might be seen as suggesting some answers to the problems so clearly articulated there. The influence of my wonderfully complex childhood family, full of strong spirits, wild adventures and a feeling that respect must first be earned, provided me with the foundations on which to build this book. I wish could spend more time being inspired by them.
Those with a more direct influence include Dr Sam Wells, a contributor to this book, who first suggested that the easiest way to write a book was to get others to do the writing. An insightful suggestion indeed! Sam speaks brilliantly about the complex world of sustainability and has also been a voice of quiet reason and optimism with whom it is always a pleasure to share a pot of green tea. Julian James sent an email in late 2007 suggesting a carbon conference in Adelaide, and Hamilton Calder from the Centre for Economic Development of Australia organised what became known as Beyond Carbon 2008. Many of the authors here were speakers at that event and so I thank both of you for your part in this. Melbourne University Publishing has provided encouragement and support and operated all the mechanics to get this publication smoothly out to those who want to read it. Thank you especially to Elisa Berg, Lily Keil, Helen Koehne and Monica Haynes for their help there. The book, of course, would not be anything without the marvellous selection of contributors. I feel very privileged to have so many leading thinkers providing such concise, relevant and practical views that will undoubtedly add to the conversation on carbon. All of the authors are experts in their fields and yet have managed to provide their views as single pieces of the jigsaw. I have thoroughly enjoyed working with each of the authors and thank them all for their contributions. The biggest thanks, however, must go to my beautiful wife, Kate. She has tolerated me jumping out of the safe corporate world and into the exciting and rewarding life that we have. Without her support and guidance this book would not exist.
Acknowledgements
341
Contributors
Dr Kristin Alford is the Managing Director of Bridge8 Pty Ltd. She is a futurist and engineer with an interest in how nanotechnologies are developed and applied to global issues including climate change. Kristin is also board member of the Australian Nano Business Forum and one of the founders of CleanFutures.. Dan Atkins is the Co-Founder and Managing Director of the Shaper Group, a group of companies that work with businesses, government and not-for-profit organisations who want to improve their competitive advantage and reputation by embracing sustainable business practices. Prior to forming the Shaper Group, Dan was the Project General Manager of Environmental Affairs for Toyota Australia. He is currently completing a PhD on sustainable industries with the RMIT School of Education. Fraser Bell is a partner at Thomson Playford Cutlers where he heads the Environment Planning and Climate Change practice. He is a member of the South Australian Wine Industry Association Environment Committee and also the Winemakers Federation of Australia Environment Committee. Fraser has particular expertise in environmental management systems and groundwater regulations.
Professor Barry Brook holds the Foundation Sir Hubert Wilkins Chair of Climate Change and is Director of the Research Institute for Climate Change and Sustainability at the University of Adelaide. He has published two books and regularly writes opinion pieces and popular articles for the media. He has received a number of distinguished awards in recognition of his research excellence, which addresses the topics of climate change, computational and statistical modelling and the synergies between human impacts on Earth systems. Peter Castellas is the Joint Founder and Managing Director of Clean Technology AustralAsia, a business established to develop clean technologies in the Asia-Pacific region. Throughout Peter’s twenty-year entrepreneurial career, he has worked at the leading edge of the sustainable development agenda and has advised leading corporations, regional governments and financial institutions. Tony Cutcliffe is a director of the Melbourne-based forum and consultancy, The Eureka Project. His knowledge and experience is built on a continuous community and corporate conversation and the application of international research in social psychology, collaboration and novel information analysis. He specialises in designing strategies that rely on the interdependence of business, environmental, economic and social conditions. He has a Masters in Commercial Law from the University of Melbourne and is a Justice of the Peace for Victoria. Andrew Dickson is a renewable-energy developer with Wind Prospect Pty Ltd, and has been Development Manager of the Snowtown Wind Farm since mid-2004. He is a Climate Change Messenger in Al Gore’s Climate Project, and is active in community sustainability initiatives including permaculture and sustainable transport. In 2008 he established the Adelaide Buyers’ Group, which harnesses group buying power to assist people to purchase ‘green’ at reasonable prices. Joe Flynn is Chief Executive Officer of the Water Industry Alliance, a not-for-profit group of almost 250 member companies who collectively have achieved more than $2-billion in exports of water-related services and technologies from Earth’s Dry Zone. Joe has an interna-
Contributors
343
tional infrastructure background at CEO level and has degrees in multi-disciplined engineering management and business. Chris Greenwood is Director of Research at New Energy Finance, the leading provider of information and financial research to investors in clean energy. Chris’s role involves understanding the value chains of each clean energy sector, mapping organisations and investors, and analysing investment activity. Chris has 15 years of analysis, consulting and management experience from a number of roles within European energy companies, consultancy and IT services organisations. He holds a Bachelor of Engineering (Honours) in electrical engineering from Imperial College, London. Maggie Hine has over twenty years’ experience in environmental, sustainability and climate-change policy development and delivery. In 2002 she was the South Australian government’s representative on the Australian delegation to the World Summit on Sustainable Development held in Johannesburg. In 2005–2007 she managed the preparation of the state’s greenhouse strategy Tackling Climate Change, and was the drafting instructor for the state’s climate-change legislation in South Australia’s Department of Premier and Cabinet. She is currently the Group Manager Sustainability at the City of Onkaparinga in South Australia. The Hon Greg Hunt, MP, has represented the Federal Electorate of Flinders since 2001. In 2007 he was appointed Shadow Minister for Climate Change, Environment and Urban Water. A Fulbright Scholar, Greg has an LLB with First Class Honours from the University of Melbourne and a Master of International Relations from Yale University. His Honours thesis was about using market forces to reduce pollution. Greg was Senior Adviser to former Foreign Minister Alexander Downer and has also worked at the United Nations Centre for Human Rights and as Associate to the Chief Justice of the Federal Court. Professor Sir David King is first the Director of the Smith School of Enterprise and Environment at the University of Oxford. He is Director of Research (Chemical Physics) at Cambridge University, President of the British Science Association and Senior Science Adviser to the
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Contributors
investment bank, UBS. In 2008, he co-authored the book, The Hot Topic, on how to tackle climate change. Sir David was the UK Government’s Chief Scientific Adviser and Head of the Government Office of Science from 2000 to 2007. Erin Kuo held the position as the Director for Cleantech AustralAsia and is now working for the Cleantech private equity firm Pacific Corporate Group Asset Management in California. Garth Lamb spent his early years on a cattle farm at Braidwood in New South Wales before undertaking a Bachelor of Environmental Science (Honours) at Wollongong University, followed up by a Masters of Journalism (Dist). In 2004 he joined WME Media, Australia’s leading environmental publishers—of WME: Environment Business magazine, the country’s leading forum for opinion and industry discussion around water, waste, energy and corporate sustainability, among other environmental industry publications. Stephen Lincoln is a Professor of Chemistry at the University of Adelaide. He holds degrees from the Universities of Adelaide (PhD) and Manchester (BSc (Hons) and DSc). He is a Fellow of the Royal Society of Chemistry (UK) and the Royal Australian Chemical Institute. Apart from environmental issues, Professor Lincoln’s research is in the interrelated areas of supramolecular chemistry and nanotechnology, and involves collaborations with universities in China, Japan, Switzerland and the United States. He has published two books and has received awards from the Royal Australian Chemical Institute and UNESCO. Frances Magill is Chief Executive Officer of Statewide, a leading superannuation fund. Frances’s commitment to her staff and the community has seen her appointed to the Premier’s Council for Women ensuring that women’s issues are on the agenda for government policy and planning. Frances is a member of many industry associations and a Paul Harris Fellow. She is also the holder of the title 2000 Telstra South Australian Business Woman of the Year. In 2006 Frances received the SA Great South Australian of the Year Business award.
Contributors
345
Amanda McKenzie completed a law degree with honours at Monash University in 2007 after completing an arts degree at the University of Melbourne in 2004. Her Honours thesis (HD) addressed the issue of ‘Designing an Emissions Trading Scheme that is Compatible with the Global Carbon Market’. Amanda is now working as Co-Director of the Australian Youth Climate Coalition, a partnership of youth organisations across Australia. She has represented Australian youth in discussions with federal and state Ministers, Professor Ross Garnaut, and business leaders, and has led Australian youth delegations to the UN Climate Conferences in 2007 and 2008. Bill McKibben is an American environmentalist and writer who frequently writes about global warming, alternative energy, and the risks associated with human genetic engineering. Beginning in the summer of 2006, he led the organisation of the largest demonstrations against global warming in American history. McKibben is active in the Methodist Church, and his writing sometimes has a spiritual bent. Peter Newman is the Professor of Sustainability at Curtin University. He is also on the Board of Infrastructure Australia. In 2001–03 Peter directed the production of WA’s Sustainability Strategy in the Department of the Premier and Cabinet. It was the first state sustainability strategy in the world. In 2004–05 he was a Sustainability Commissioner in Sydney advising the government on planning issues. In 2006–07 he was a Fulbright Senior Scholar at the University of Virginia, Charlottesville, where he completed two new books Resilient Cities: Responding to Peak Oil and Climate Change and Cities as Sustainable Ecosystems. John O’Brien is the Founder and Managing Director of Australian CleanTech, a boutique advisory, research and broking firm. He has advised numerous organisations on their options with respect to investing in clean-technology markets. He has launched the ACT Australian CleanTech Index that tracks the performance of Australia’s listed cleantech companies, facilitates the Adelaide and Sydney Cleantech Networks is on the boards of Acquasol Intrastructur Ltd, GP Aus Pty Ltd and CleanFutures, is a member of the South Australian Premier’s Climate Change Council and is a regular contributor to the
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Contributors
media. He has engineering degrees from the University of Oxford and Trinity College, Dublin, and an MBA from the University of Adelaide. Monica Oliphant is currently President of the International Solar Energy Society. She is also an Adjunct Professor at the University of South Australia in the Sustainable Energy Centre and is a renewable energy and residential energy efficiency consultant. She worked as a Principal Research Scientist for eighteen years at the South Australian Electricity Utility, undertaking end-use monitoring, energy analysis and renewable energy projects. She has participated in Australia’s Mandatory Renewable Energy Target Review and the South Australian Premier’s Round Table on Sustainability as committee member. She recently was appointed as a Board Member of the CSIRO Energy Transformed Flagship. Nick Palousis is a Principal for the Shaper Group. He specialises in sustainability and climate-change strategy, risk management, business analysis and systems integration. Among the awards he has received are the Young South Australian of the Year, the British Council Eureka Prize for Young Leaders in Environmental Issues & Climate Change, and the UNESCO Adelaide Award. In 2006, Nick was awarded the inaugural Southcott Scholarship by the University of South Australia to undertake PhD research on sustainability in engineering and industry. Dave Sag is the Founder and Executive Director of Carbon Planet. He is a pioneer of the Australian carbon-management industry, with expertise in carbon accounting, engineering, trading and offsetting. A serial entrepreneur, Dave’s career began in IT and led him into fields such as online retail, satellite-launch re-insurance trading and work at the European Patent Office. In 1998, Dave received an Australia Day Council award for services to Australian business. Having founded and grown a number of companies in Australia and Europe, Dave’s diverse experience provides him with the insight to guide clients through the rapidly evolving carbon market. Mark Schneider leads the Specialised Funds and Investments group in the Sydney office of Investec Bank, part of the firm’s international
Contributors
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Project and Infrastructure Finance practice. He holds an Honours degree in Electrical Engineering and a Bachelor of Science from the University of Sydney. He is a Director of Viridis Energy Capital Pty Ltd and the manager of listed Viridis Clean Energy Group. As early as 1994 Mark was involved in meetings of the National Grid Management Council that ultimately culminated in the formation of the National Electricity Market. He continues to play a role in market design and management as a member of the Participant Advisory Committee to the board of NEMMCO. Stewart Taggart is a director of Acquasol Infrastructure Ltd, a developer of environmentally friendly power and water solutions. He is also founder and administrator of DESERTEC-Australia and DESERTEC-USA. Both promote the idea of ‘Clean Energy from Deserts’ through aggressive development of solar, geothermal and wind energy in arid areas. Nicholas Taylor formed Outcrop to offer independent advice and bespoke research on environmental, social and economic issues following more than seven years in the investment industry. In 2007, Nicholas won the inaugural ‘Environmental, Social & Governance Research’ award at the Australian Sustainability Awards. He now serves as an active member of various networks and associations, including the Network for Sustainable Financial Markets and the United Nations Environmental Programme Finance Initiative Academic Network. Allan Tranter has been involved in community wellness for thirty-five years. His commitment to improving people’s lifestyles saw him found Creating Communities in 1992, a company that dominates a unique niche market. He has a background in the public sector, having been the Director of Recreation in Western Australia. Allan spent several years in Asia working in shopping-centre management and executive development. He has served on many boards and is well published. Lisa Wade is the Managing Director of the arkx carbon fund and has over fourteen years of experience in financial services. Until 2003, Lisa was a Director at Citigroup (London and Australia) before moving to
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manage funds for a large family office in Melbourne. Lisa has been a keen follower of environmental concerns since majoring in The Fragile Planet in her final year of university. She is also particularly passionate about issues that affect the ocean as she is a keen scuba diver. Dr Sam Wells is a Rhodes Scholar, with over 20 years’ corporate experience in human resource management and organisational development. He consults and teaches in organisational sustainability and is the MBA Director at The University of Adelaide Business School. Sam is also a director of an innovative wind generation business, GPAus Pty Ltd. Dr John Wright is the Director of the CSIRO Flagship Program, ‘Energy Transformed’. This is one of six CSIRO Flagship Programs aimed at focusing research and development on issues of national importance in key areas of the Australian economy and environment. Previously, Dr Wright was Chief of CSIRO Energy Technology, a position he held from 1994 to April 2002. In this role, Dr Wright was also the coordinator of the CSIRO Energy Sector, responsible for the strategic development of all CSIRO’s energy portfolios and activities. Tenke Zoltáni is based in London as an Associate at IDEAcarbon, an independent provider of carbon-market intelligence and strategic advice to the international climate community. Her expertise covers regional (emerging) carbon-markets developments and strategy, international policy, and primary CERs. While at IDEAcarbon, Tenke has pioneered a primary CER Index and has also worked alongside Lord Nicholas Stern, Vice-Chairman of IDEAcarbon, on Chinese emissions forecasts and climate economics. Tenke holds an Master of Science in political economy from the London School of Economics, and a Bachelor in Economics from Columbia University.
Contributors
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Selected Bibliography
Carson, Rachel, Silent Spring, Hamish Hamilton, London, England, 1962. Churchill, Winston, The Second World War, Volume 1: The Gathering Storm, Mariner Books, Boston, USA, 1986. Correll, Robert W, ‘Challenges of Climate Change: An Arctic Perspective’, Ambio: A Journal of the Human Environment, vol. 35, no. 4, June 2006, pp. 148–52. Dallaire, Romeo and Brent Beardsley, Shake Hands with the Devil: The Failure of Humanity in Rwanda, Random House of Canada, Toronto, Canada, 2004. De Graaf, John et al, Affluenza: The All-Consuming Epidemic, Berrett-Koehler Publishers, San Francisco, USA, 2001. Festinger, Leon, A Theory of Cognitive Dissonance, Row, Peterson & Company, Evanston, USA, 1957. Flannery, Tim, Weathermakers: The History & Future Impact of Climate Change, Text Publishing, Melbourne, 2005. Garnaut, Ross, The Garnaut Climate Change Review: Final Report, Cambridge University Press, Melbourne, 2008. Gilbert, Richard and Anthony Perl, Transport Revolutions: Making the Movement of People and Freight Work for the 21st Century, Earthscan/ James & James, London, England, 2008. Hargroves, Karlson and Michael H Smith, The Natural Advantage of Nations: Business Opportunities, Innovation and Governance in the 21st Century, The Natural Edge Project, Earthscan, London, 2005. Hawken, Paul, Amory Lovins and Hunter Lovins, Natural Capitalism: Creating the Next Industrial Revolution, Earthscan, London, England, 1999.
International Energy Agency, World Energy Outlook 2006, IEA, Paris, France, 2006, www.worldenergyoutlook.org/2006.asp Kuhn, Thomas, The Structure of Scientific Revolutions, University of Chicago Press, Chicago, USA, 1970. Lankshear, David and Neil Cameron, ‘Peak Oil: A Christian Response’, Zadok Perspectives, Spring 2005, pp. 7–11. Lear, Linda, Rachel Carson: Witness for Nature, Henry Holt & Co., New York, USA, 1997. Lincoln, Stephen, ‘Fossil Fuels in the 21st Century’, Ambio: A Journal of the Human Environment, vol. 35, no. 28, December 2005, pp. 621–7. ——, Challenged Earth: An Overview of Humanity’s Stewardship of Earth, University College Press, London, England, 2006. Maalouf, Amin, The First Century After Beatrice, Abacus, London, England, 1994. Meadows, Donella, ‘Envisioning a Sustainable World’, paper presented at Third Biennial Meeting of the International Society for Ecological Economics, San Jose, Costa Rica, 1994. McKibben, Bill, The End of Nature, Doubleday, New York, USA, 1989. —— Deep Economy: The Wealth of Communities & the Durable Future, Macmillan, USA, 2007. McKibben, Bill and Step It Up Team, Fight Global Warming Now: The Handbook for Taking Action in Your Community, Macmillan, New York, USA, 2007. Monks, Bob and Nell Minnow, Corporate Governance, Cambridge University Press, Boston, USA, 1995. Newman, Peter and Jeffrey Kenworthy, Sustainability & Cities: Overcoming Automobile Dependence, Island Press, Washington DC, USA, 1999. Penrick, Ron and Clint Wilder, The Clean Tech Revolution: The Next Big Growth & Investment Opportunity, Collins Publishers, New York, USA, 2007. Polak, Fred L, The Image of the Future, trans. and abridged by E Boulding, Elsevier Scientific Publishing Company, The Netherlands, 1973. Spratt, David and Philip Sutton, Climate Code Red: The Case for Emergency Action, Friends of the Earth, February 2008. Stern, Nicholas Herbert, The Economics of Climate Change: The Stern Review, Cambridge University Press, Cambridge, England, 2006. Taylor, Nicholas and Scott Donald, ‘Sustainable Investing: Marrying Sustainability Concerns with the Quest for Financial Returns for Superannuation Trustees’, Russell Research, August 2007.
Further Reading
351
Index
abundance, 21–2, 24, 93; energy, 87–8, 94 ACT Australian Cleantech Index, 138, 186 Adams, Phillip, 7 Adelaide Buyers’ Group, 91 Adelaide Cleantech Network, 140 Advertising Standards Association, UK, 157, 161 affluenza, 67 agri-business, 137, 155 airship, 102, 113, 338 American Recovery and Reinvestment Act, 185 animal spirits, 268 AquaSpy, 147 Arrhenius, Svante, 33 Asia-Pacific Partnership on Clean Development and Climate (APP), 270 asset consultant, 192, 202 asset sharing, 95 Australian Consumer & Competition Commission (ACCC), 52, 56, 127 Australian Council of Recyclers, 79 Australian Council of Super
Investors (ACSI), 191, 201 Australian Local Government Association (ALGA), 74, 77–8 Basslink, 266 Beyond Carbon 2008, 20, 25, 341 biochar, 226, 229, 314–5 biodiesel, 36–8, 333 bioethanol, 36–8 biofuel, 36, 47, 102, 112–3, 135, 138, 187, 213, 332–4; algae, 113, 135, 333; cellulosic, 38, 135, 213 biomimicry, 144, 240–1, bubbles, green, 137 Business Council of Australia, 53 Cameron, James, 172 carbon; branding, 155–61, 164; capture and storage (CCS), 4, 136, 215–6, 311, 313–4, 333, 335; leakage, 317, 321, 325–8; performance, 154, 159, 162–4; trading, 35, 80, 82, 135–6, 139, 166, 188, 256, 316 Carbon Disclosure Project, 155, 167, 200
Carbon Park, 83 Carbon Pollution Reduction Scheme, 54, 77, 121, 125–6, 128, 154, 180, 185, 194–5, 197, 326, 334 Carbon Trust, 223 Carson, Rachel, 21 ,256 Center for Transit Oriented Development, 109 Centre for Policy Development, 69 Certified Emissions Reduction (CER), 178 Chatswood Transport Interchange, 105 Cities for Climate Protection program, 73 Clean Development Mechanism (CDM), 174, 178–9, 181–2, 187–9, 276–7 CleanEdge, 223 CleanFutures, 242 cleantech, 20, 25, 57, 83, 120, 134–41, 142–4, 149, 178, 186, 268, 278, climate change, viii–x, 1–8, 13, 15, 19–20, 25, 30, 32–5, 46, 52, 55, 64, 65–9, 74, 77–8, 86, 90, 98, 108, 119, 121–4, 138, 140–1, 149, 161, 165, 171, 191, 225–6, 256–7, 287, 289–90, 301–2, 331; ethics and morality of, 292–4, 298–302; risks, 71, 121, 126–8, 158, 193–4, 196–9, 291, 298; runaway, 25, 291 climate; clever, 69; fatigue, 6, 139–41; porn, 165 coal, 3, 25, 28–30, 45–6, 101, 141, 214, 234, 262, 264, 333–5 ; clean, 136, 226, 229, 247, 257, 313, ; peak, 311–4; Coase theorem, 174, 176 communities, 2–4, 8, 26, 63–4, 65–72, 129, 139–40, 250–1, Connelly, Mark, 69–70 Coorong, 20, 142 corporate average fuel economy (CAFE), 218 Corporate Social Responsibility, 125, 196 Cullen, Peter, 147
de Graaf, John, 67 Desertec, 265 drought, 1, 64, 126, 140, 145, 227, 290 Dunphy, Dexter, 25 D’Vine Ripe Tomatoes, 148 Dyesol, 241, 279 ecological footprint, 237–8, 241 Ecomagination, 131 Ecos Corporation, 56 efficient frontier, 205–9; clean energy, 208–9 emissions-intensive trade-exposed industries (EITE), 3, 326, 335 emissions trading scheme, 79, 125, 156, 174, 180, 188, 226, 233, 326, 337 energy; abundance, 87–8; conversions, 47; efficiency, 77, 96, 130, 179, 186–7, 211–3, 216, 218, 226, 232; storage, 135, 215, 233, 278, 280 Energy Watch Group, 312 Enhanced Analytics Initiative (EAI), 201 Enlightenment, 287 environmental footprint, 154 Environmental, Social and Governance (ESG), 137, 172, 190–4, 199–202 Envisioning, 23, 26 equity; intergenerational, 296; intragenerational, 296 ERTEC tick, 3 Ethanol, 36–8, 213, 332 EU Emissions Allowance (EUA), 178, 188 European Union Emissions Trading Scheme (EU ETS), 174–6, 178, 180, 182, 188, 216, Externalities, 81, 94, 168, 174–5, 251, 273 Festinger, Leon, 24 Flannery, Tim, 8, 340 food miles, 112, 162
Index
353
Friedman, Thomas, 223 Fukuyama, Francis, 257 Garnaut Climate Change Review, 121, 201, 229, 292 Garnaut, Ross, 55, 166, 299, 302, 316 Geodynamics, 261, 280 geothermal energy, 44–5, 47, 77, 135, 187, 213–4, 224, 226, 230, 257–69, 274, 280, 301, 314, 336, 339 Global Energy Network Institute (GENI), 265 Global Reporting Initiative (GRI), 58, 163, 201 Gore, Al, 56, 86, 97, 165, 172, 256 Graetzel, Michael, 240 Grayling, AC, 287 green collar jobs, 4, 141, 177 Green Oriented Development (GOD), 109–10 Greenwash, 53, 56, 127, 156–7, 161, 247 Hansen, James, 16–7, 299 Harvest Lakes, 70 high-voltage direct current power lines (HVDC), 137, 264–6 Horne, Donald, 258 Hornsby Shire Council, 77, 82 hot dry rocks, see geothermal energy house design, 87, 95 Human Development Index (HDI), 237–8 human rights, 294–5 Hurricane Katrina, 126, 292, 298 Hyder Consulting, 53 Hydroelectricity, 35–6, hydrogen, 42, 45–7, 113, 187, 315, 331, 333, 337, 339; economy, 331, 333 Inayatullah, Sohail, 238 industrial revolution, 30, 33, 123, 175, 245, 249, 290 innovation, 74, 101, 130, 149–50, 173, 176, 250, 252, 280, 301, 332, 338 intelligent grid; see smart grid
354
Index
Intergovernmental Panel on Climate Change (IPCC), 33, 210, 227, 292, 298–9, 317, 325 International Atomic Energy Agency, 38 International Council for Local Environmental Initiative, 73 International Energy Agency, 29, 186, 211, 268 International Law, 294–5 International Thermonuclear Experimental Reactor, 39 investment manager, 192, 201–2 Investor Group on Climate Change, 201 Joint Implementation (JI), 178 Kant, Immanuel, 287 Keynes, John Maynard, 268 Kiribati, ix Ki-Moon, Ban, 64 King Canute, 245 Kivalina, 7 Kogarah Town Square, 110 Kursweill, Ray, 268 Kyoto Protocol, ix, 125, 154, 166, 173, 176, 185, 188, 197, 216, 246, 325; post 2012, 35, 177, 234, 277, 317, 328 LandCorp, 70 Landfill, 77–8, 94, Landry, Charles, 150 law of accelerating returns, 268 Lidell power station, 42 local government authority, 68, 71 Local Government Emissions Trading Scheme, 79 London Array, 44 Luddite, 245, 247 Meadows, Donella, 21–4, 26 Moana Luo, 33–4 Mobium Group, 127 Moore’s Law, 268, 312 Moreland Energy Foundation, 83
Murray-Darling Basin, 19, 148, 227, 292 Murray Link, 266 Murray, River, 88, 142, 145, 150 nanoscience, 240, 306 nanotechnology, 240–3 National Greenhouse Emissions Reporting Scheme (NGERS), 124, 126, 128, 198 natural gas, 28, 31, 42, 45–6, 102, 112–3, 136, 214, 262, 266–7; compressed natural gas (CNG), 112, 333; liquefied natural gas (LNG), 112, 226, 333 Network for Sustainable Financial Markets (NSFM), 201 NEX index, 186 nuclear, 38–9, 46–7, 136–7, 214, 257–8, 264, 334, 336–7; arms, 256; fission, 38–9, 47; fusion, 39; waste, 39 Obama, Barack, 185 ocean energy see wave energy and tidal energy oil, peak, 71, 86–7, 90, 108–10, 114, 268, 311, 332 Oliver, Jamie, 63 Ombudsman for Future Generations, 297 Onkaparinga, City of, 77, 83 Organization for Economic Cooperation and Development (OECD), 31 paradigm, 22, 26, 264, 295, 302; shift, 22–4, 130, 193, 199, 202, 308–9 parts per million (ppm), 14, 16–7, 33–4, 149, 211, 227, 299, 319, Pedestrian Oriented Development (POD), 102, 109–10 phosphorus, peak, 311, 314–5 photolysis, 45 photovoltaics, see solar photovoltaics Polak, Fred, 238–9 positive feedback loop, 291, 298
Randwick City Council, 79 Reconnecting America, 109 recycling, 79, 135, 138, 163, 297; cost of, 53; paper, 55; water, 70, 93, 144, 146, 150, 152 Regnan, 191 Renewable Energy Certificate, 91 resilience, 68, 76, 87–8, 91, 102, 114, 138 risk management, 71, 127–8, 179, 182, 197, 272, 292, 299, 313 resource depletion, 315, 339 Responsible Investment Association of Australasia (RIAA), 201 Ricardo, David, 256 Rudd Government, ix, 53, 68, 70, 166 Ruddite, 247 Sagan, Carl, 289 Salisbury, City of, 144–5 Sentek, 147 smart grid, 102, 110–1, 215, 224, 337–8 Smith, Adam, 256; Smithean economics, 175 social fabric, 66 Socially Responsible Investments (SRI), 137, solar energy, 40–3, 111, 135, 187, 224, 226, 230–3, 240, 250, 259–63, 266, 330–1; solar thermal, 41–2, 136, 213, 267, 279, 336; solar photovoltaics, 41, 91, 93, 213–4, 241, 279; passive, 87, 95, 110 Solar Tres, 41 Solar Two, 41 superannuation fund, 190–2, 195–6, 201–2 sustainability, 20–4, 52, 56, 58, 64, 68, 70, 73, 78, 99, 101, 126–30, 132, 150–2, 163–4, 192–5, 200–2, 287, 339; domains, 122–6 Sustainable Choice Program, 82 telepresence, 102, 113 Tesco, 131, 161 Thoreau, Henry David, 19
Index
355
Thorium, 39, 47, 337 tidal energy, 47, 135, 226, 230, 274 Total Environment Centre, 56 Townsville Carbon Exchange, 80–1 transit leverage, 103 transport, 3, 74, 88, 91–3, 98–114, 309, 332–4; emissions from, 75, 198; public, 26, 66, 140, 250 Transit Oriented Development (TOD), 102, 108–10 troughs, parabolic, 41–2 Trucost, 55, 130, 177 Tuvalu Islands, ix United Nations Earth Summit (1992), 65, United Nations Principles for Responsible Investment (UNPRI), 172, 200–1 uranium, 38–9, 44, 47, 136, 257, 334, 337 vehicles; battery electric (BEV), 92–3, 102, 111, 215, 333–4; hybrid, 93, 111, 215, 333–4; plug-in electric hybrid (PHEV), 333
356
Index
Verified Emissions Reduction (VER), 178 Virginia Pipeline Scheme, 144 Walsh, Bryan, 13 Waste; sector, 77–9, 135, 138, 315; to energy, 35, 213–4, 278, 280; water, 54, 93, 143–4 water, 88, 110, 123, 135, 142–53, 241–2, 292; deregulation, 149–50; eating, 146–9; governance, 145, 150–2; recycling, 70, 83, 93, 144–5; soil, 315; splitting, 330–1, 337; vapour, 34–5 Water Industry Alliance, 343 wave energy, 47, 135, 187, 229, 257, 274, 314 Weather Makers, 8, 340 Weiss, Edith Brown, 295, 297 Whisson windmill, 241 wind energy, 43–4, 47, 93, 135, 138, 187, 207, 213–4, 216, 223, 226, 241–2, 257, 265–6, 268, 274, 279, 336, Wizard Power, 261, 279 World Bank Carbon Finance Unit, 178
