MELBOURNE (Reuters Breakingviews) – It is tempting to hope that the Australian government led by Prime Minister Scott Morrison starts to see the light on climate change. In a speech on Friday, Treasurer Josh Frydenberg called it “structural and seismic change” for the country’s financial system, which relies heavily on foreign investors increasingly aware of the impact of rising temperatures https: //ministers.treasury.gov.au/ ministers / josh-frydenberg-2018 / speeches / address-australian-industry-group-melbourne. Morrison confirmed on Sunday that he was working on a national net zero policy. The problem is, there is a big risk of greenwashing. Breakingviews explores the administration’s reluctance to tackle global warming and how to scrutinize any plan that emerges.
WHY AUSTRALIA DOESN’T ALREADY HAVE A NET-ZERO PLAN?
In short, politics. Climate change has played a significant role in the defeat of at least four, if not five, of the country’s six prime ministers since 2007, and usually by coup rather than at the ballot box. The current administration is a coalition government in which Morrison’s Liberal Party relies on the support of the smaller National Party for its one-seat majority. The National Party traditionally represents rural Australia, home to farmers and coal miners. One of their most vocal members, Matt Canavan, said on Sunday he was “standing” against the net zero.
WITH ONLY 26 MILLION PEOPLE, HOW IMPORTANT IS AUSTRALIA IN THE CLIMATE DEBATE?
The country may rank 55th in the world in terms of population, but it is one of the top 15 greenhouse gas producers and the most emitting developed country.
WOW. HOW IS IT?
Australia depends on coal for around 70% of its electricity production. It is the second largest exporter of thermal coal used in power plants and, at 55% of the global supply, the largest supplier of metallurgical, or coking, coal used to make steel. It is also the world’s largest exporter of liquefied fossil gas.
SO COAL IS A HUGE PART OF THE COUNTRY’S ECONOMY?
Actually no. In a good year, the value of exports approaches A $ 70 billion ($ 51 billion). That’s good, but it’s 13% of exports and about 3% of GDP. Overall, the industry supports some 40,000 jobs, or one-third of 1% of the workforce.
FRYDENBERG SAID AUSTRALIA IS REDUCING EMISSIONS FASTER THAN MANY OTHER COUNTRIES. ISN’T THAT GOOD?
He plays with statistics. Australia’s emissions have fallen by around 20% since 2005, when the country reached a peak area destroyed by deforestation etc. The liberal-led administration chose this year over 2000 when it set its goals in Paris in 2015. Frydenberg’s data also includes the effects of the pandemic and intense water shortages between 2017 and 2019, when the number of cattle and their associated emissions have fallen. If excluded, Australia’s emissions have increased 7% since 2005, according to the Australia Institute think tank.
DISCOUNTS ARE DISCOUNTS, ARE NOT?
There is a good chance that the falls caused by the pandemic and aridification will be reversed. Cattle farmers are already having a good year 2021 and are increasing their herds after more than a year of heavy rain.
Moreover, the statistic implies that the government is actively doing something when it is not.
DON’T THE COAL PLANTS CLOSE UNDER?
They are, but because they are old. AGL Energy’s Liddell complex will be closed by 2023 and one of EnergyAustralia’s complexes will be out of service by 2028. Each represents around 3% of national emissions. When AGL announced in 2018 that it would shut down Liddell, however, a government minister pressured the council to sell rather than shut it down. Guess who the minister was.
On the spot. When he was Minister of Energy.
SO WHAT HAS THE MORRISON GOVERNMENT DONE ABOUT CLIMATE CHANGE?
There has been uneven aid for renewables, but most of the administration’s attention has focused on a ‘gas recovery’ of Covid-19, and ‘technology not taxes’.
THE FIRST SEEMS SUFFICIENTLY SIMPLE.
Yes, “gas upgrading” favors fossil gas. This is good news for Woodside Petroleum, which is gaining strength by acquiring the oil and gas activities of BHP, and Santos, which acquires rival Oil Search. They both frantically push for new projects. Gas drilling produces on average half of the carbon equivalent emissions of coal. The large Barossa de Santos field in the Timor Sea, however, is described as a “carbon bomb” by the Australian Center for Corporate Responsibility, which challenges the company’s net zero policy in federal court .
WHAT DOES “NON-TAXED TECHNOLOGY” MEAN?
It is the federal government that says it will not push to install solar panels or buy electric vehicles, even though electricity and transportation account for more than half of national emissions. State governments, including the New South Wales Liberal Administration, do offer tax breaks, however.
THERE IS NO TAX RELIEF FOR ANY TECHNOLOGY?
There is a lot of support for technology that helps fossil fuel companies. One is carbon capture and storage, or sucking up emissions and putting them back in the ground so that the oil, gas and coal industries can keep running. The problem is, CCS, as it’s called, is expensive, doesn’t work on a large scale, and might never do. Hydrogen is another supported.
WHAT WILL AUSTRALIA’S NET ZERO CREDIBLE POLICY LOOK LIKE?
Frydenberg took one of the first steps: to recognize that climate change is a structural change that will affect the country’s economy and its ability to attract all-important foreign capital. More generally, however, the Morrison government clings to factors over which it has little or no control. Australia does not have a domestic auto industry, for example, so it has no choice but to turn to the electric vehicles that major manufacturers are developing. Why not support him?
Likewise, two of its largest overseas coal markets – Japan and South Korea – plan to reduce their dependence over time. China has already banned Australian coal for independent political reasons and intends to stop funding coal-fired power plants abroad. Meanwhile, the Asian Development Bank is raising a fund to buy and shut down regional coal-fired power plants that are already in operation.
Any reasonable plan should include targets for reducing gross – and not just net – emissions in every major sector of the economy: agriculture, energy production, energy use, transport and industry. An ambitious timetable would also help. The annual goals would really focus the mind, but at the very least tie them to the three-year electoral cycle. Bonus points for linking the remuneration of ministers and civil servants to objectives.
Then commit resources, financial and otherwise, to manage the societal impacts of the transition. Up to 1.8 million new jobs could be created by embracing low emissions, from building renovations to expanding renewables to land reclamation, think think tank Beyond Zero Emissions. There is no guarantee that these will come to areas where coal, gas and agriculture have dominated; they will need support. Finally, establish an independent commission to oversee the process. The danger is that the Morrison government ignores all of this and sets a nebulous 2050 target too dependent on unproven technologies like carbon capture. If that happens, it will only be a pre-COP26 publicity stunt.
Follow @AntonyMCurrie https://twitter.com/antonymcurrie on Twitter
– Australian Prime Minister Scott Morrison confirmed on September 26 that his government is developing a net zero emissions plan, following comments on September 24 by Treasurer Josh Frydenberg that the country “cannot run the risk that the markets mistakenly assume that we are not in transition [to reduce greenhouse-gas emissions] in agreement with the rest of the world ”.
– In a speech to the Australian Industry Group, Frydenberg said climate change is something that “presents risks that we must manage and opportunities that we must seize”. He noted that Australia’s carbon dioxide equivalent emissions have fallen by more than 20% since 2005, “clearly pointing to our 2030 target of a 26-28% reduction.”
– Frydenberg also said Australia has historically relied on foreign capital, with the stock of foreign investment currently standing at A $ 4 trillion ($ 2.9 trillion). He added that nearly half of the country’s government bonds are held by foreign investors and about a fifth of the wholesale funding of the country’s banks comes from abroad.
(Edited by Jeffrey Goldfarb and Katrina Hamlin)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.