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Editorial: May 2007
Coal mining will outlast green hysterics
‘Not all jobs are good’, says former Liberal Party leader John Hewson.
That assertion, odd for an economist, fell from Hewson’s recent
AustralianFinancial Review column lashing the Government and
Labor for appeasing the coal industry over climate change. Neither, he
says, will confront the ‘necessary transition’ to an economy without
coal mining. ‘Some of those jobs, indeed some of those industries’,
writes Hewson, ‘may not be able to be protected, nor should they be’.
More than anything, Hewson’s column encapsulates an important truth
about our climate change debates – there is no absolute response;
rather, it depends on your socio-economic standpoint.
Over recent decades university graduates engaged in professional or
quasi-professional ‘knowledge work’ have grown from a small fraction to
over 30 per cent of the workforce. Since this echelon controls the
channels of ideas and information, it is hardly surprising that we are
bombarded with policy prescriptions that promote, or protect, their
interests at the expense of other socio-economic strata. The
gentrification of social policy is a prominent feature of contemporary
politics. John Howard, ‘the battler’s friend’ is not immune to it. The
trend is apparent on issues like ‘work-life balance’,
‘diversity’, urban development, higher education and, last but not
least, the environment, especially climate change.
When Hewson says some jobs aren’t good, he’s not thinking of his own.
And nor does the whole herd of alarmists bellowing for an end to coal
It’s fashionable to assert that ‘transition’ to a decarbonised
economy will be relatively painless. Those peddling this myth tend to
draw on a series of undigested, and often misunderstood, research papers
and reports, starting with last year’s Allen Consulting
effort for the Business Council’s Roundtable on Climate Change.
According to the report, greenhouse gas emissions cuts of 60 per cent
from year 2000 levels by 2050 would only reduce GDP by 6 per cent less
than otherwise. Then came the famous - or infamous, depending on your
perspective - Stern Review estimate that ‘the expected annual cost
of emissions reductions consistent with a trajectory leading to
stabilisation … is likely to be around 1 % of GDP by 2050’. The figure
of one per cent was widely described as a sinch. Now, the third
instalment of the IPCC’s Fourth Assessment Report, released at the
recent Bangkok conference, follows in a similar vein, stating that
reducing emissions to acceptable levels will cost no more than 3 per
cent of global GDP by 2030.
(The IPCC report brought on the inevitable Sydney Morning Herald
headline: ‘It won’t cost the earth to save the planet’.)
Such pronouncements are commonly used to dismiss the understandable
fears of energy sector investors and unions. One egregious case is the
AFR’s Brian Toohey, who claims ‘Australian households and
businesses will barely notice the cost of achieving deep cuts to
greenhouse gas emissions by 2050’, and adds ‘we could adopt the 80 per
cent target set by California’s Republican Governor, Arnold
Schwarzenegger, and still find it a breeze to achieve’.
A breeze to achieve? Toohey writes from his own secure perspective. What
for him is a breeze, may well be a tornado for thousands of blue-collar
families. While progressives call for drastic measures to save our
common inheritance, there won’t be common consequences - some will win,
others will lose.
In his book What it means to be a Libertarian, American writer
Charles Murray addresses this subject of skewed perspectives with
admirable clarity. ‘Most environmental measures represent class
interests in disguise’, he explains, ‘and involve no public goods worthy
of the name’. Writes Murray:
A thought experiment will illustrate what I
mean by class interests. Imagine a Congress of the United States that is
composed entirely of blue-collar workers and farmers …They identify with
blue-collar neighbourhoods, blue-collar incomes, and blue-collar
recreations. The rest of this Congress are farmers who know the
environment not as an abstraction or an ideal but as a day-to-day
reality of their working lives. Let us imagine this new Congress as it
turns to the latest proposals for environmental law….
Who is right? The Congress we have now or the Congress of blue-collar
workers and farmers? Neither. Many of the currently fashionable
environmental positions are arbitrary, and the different rules set by a
Congress of blue-collar workers and farmers would be equally arbitrary.
Obviously, some people will suffer dislocation from Kyotoesque emissions
cuts, notably workers employed in fossil fuel related industries. On the
other hand, most middle class professionals will emerge unscathed or
benefit from the process.
Aggregate figures don’t tell the real story. First, there is no
unanimity that the impact on GDP growth over time will be negligible.
Last year the Australian Bureau of Agricultural and Resource Economics (ABARE)
published a much overlooked
paper on the economic impacts of climate change policy. The bureau
estimated that if we met the Kyoto targets, GDP in 2050 will be 10.7 per
cent lower than otherwise. That’s not so trivial. And some environmental
economists have come out against Stern’s conclusions, Professors
Nordhaus of Yale and
Partha Dasgupta of Cambridge to name just two.
Second, aggregates, national or global, say nothing about the
distribution of employment growth over time. Under the hammer of carbon
abatement measures, some industry sectors will decline or disappear,
while others will expand. In the same paper, ABARE estimated that if we
took independent climate action, even in conjunction with global action,
by 2050 our coal and ‘non ferrous metal’ industries (measured by output)
will be respectively 32 per cent and 75 per cent smaller than otherwise.
In contrast ‘services’, where most of our loud-mouth greenies are found,
will only be 6 per cent smaller. Few displaced workers will manage the
transition to expanding sectors.
That’s something you won’t hear from the assortment of ‘shut-the-mines’
zealots, including the Greens, Greenpeace, the Wilderness Society and
the Nature Conservation Council, who assembled in Sydney for a coal
summit on 30 April.
It won’t be a ‘breeze’ at all. Our green-tinged middle class can afford
to push the whole panoply of Kyotoesque measures like carbon taxes,
emissions trading and renewable energy development. As Murray suggests,
however, their choices are ‘arbitrary’. There are alternative
The starting point, of course, is that domestic action will have no
impact on global climate realities. Our population is too small. The
coal question, though, has a particular twist. Hardline greens contend
that, as a major coal exporter, we are morally culpable for the carbon
emitted by end users.
This can only be judged in the overall context of global energy, and
specifically, coal markets. Australia is the world’s largest single coal
exporter, but we account for 29 per cent of coal exportation. The rest
comes from various suppliers, ready to fill the gap created by our
withdrawal. Many of these are developing countries with few qualms about
carbon emissions. And our largest buyers are Japan and South Korea, not
emerging giant emitters like China, India, Brazil and Indonesia or major
contemporary emitters like Europe and the US.
Japan, which in 2004-5 bought 54 per cent of our steaming coal and 36
per cent of our coking coal, emits
5 per cent of the world’s carbon. By comparison, the US (24.3 per
cent), the European Union (15.3 per cent) and China (14.5 per cent)
together emit more than half the total.
The dynamic factor in this mix is China, which is set to overtake the US
by 2009. The dimensions of China’s coal consumption are sobering.
Steve Piper of energy information firm Platts, climate change has
done little to spoil the world’s appetite for coal, and China, in
particular, is voracious. More than 361 coal-fired power stations have
been built by the Chinese since 2002, and 65,000 megawatts (MW) worth of
new facilities are under construction. A further 100 stations are
planned. About one coal-burning plant is being added to China’s supply
capacity per week. Although China mined 2.2 billion tonnes of thermal
coal last year, imports have had to rise from two million tonnes in 2001
to 31 million in 2006. The forecast is 36 million this year and 50
million by 2012.
Nor have other countries called a halt. The US has added 27,000 MW of
coal-fired capacity since 2002 and plans to develop another 37,700 MW by
2012. In the meantime, Kyoto-signing Europe added 25,000 MW over the
last five years and plans an extra 13,000 MW by 2012. And India has
projects adding up to 38,000 MW. Overall, 37 countries have plans to
build more coal-fired plants, says Piper. By 2012, the world will have
7,500 coal-fired stations in 79 countries.
In short, coal powers 40 per cent of the world’s electricity production
and the International Energy Agency projects demand to double by 2030.
Will any of this change if we pull the plug? Not much.
Recently, the prestigious Massachusetts Institute of Technology (MIT)
published a wide-ranging study, The
Future of Coal. The study points out that ‘in contrast to oil and
natural gas, coal resources are widely distributed around the world’,
and ‘coal reserves are spread between developed and developing
countries’. One fundamental conclusion: ‘we believe that coal use will
increase under any foreseeable scenario because it is cheap and
While we are the leading coal exporter, moreover, according to US
Department of Energy estimates we only have 8 per cent of the
world’s reserves. The largest reserves are concentrated in the United
States with 26 percent and the Former Soviet Union with 23 percent,
followed by China (12 percent), Germany (7 percent), South Africa (5
percent), Poland (2 percent) and many other countries with smaller
shares. Clearly, there are ample substitutes should we pull out.
What can be done? Despite reports that John Howard is negotiating an
APEC linked regional emissions trading scheme, the Chinese government,
for one, won’t kick the coal habit any time soon. The Communist Party’s
hold on power depends on continuing growth at breakneck speed. As China
specialist David Lambton pointed out in an article republished by the
AFR (from Foreign Affairs), ‘Beijing’s priority is sustained,
rapid growth, because growth is fundamental to the regime’s legitimacy -
and most everything else’. Hence, last month’s National Climate Change
Assessment Report, a document released by China’s top economic planning
body, rejected ‘absolute and compulsory’ caps on the country’s
greenhouse gas emissions.
Nevertheless, the MIT study expresses confidence that ‘carbon capture
sequestration (CCS) is the critical enabling technology that would
reduce [carbon dioxide] emissions significantly while also allowing coal
to meet the world’s pressing energy needs’. The study estimates that a
carbon emission price of $30 (US) per tonne would make CCS cost
competitive. The crucial problem is whether the world’s major emitters
can be persuaded to implement such an impost, and what form it should
take. If, as we have argued,
global emissions trading proves to be a pipedream, the only alternative
is some type of international agreement - a sort of supersized
AP6 - mandating
cooperation in the development, dissemination and application of
For such an agreement to emerge, coal suppliers need to be backed by
democratically accountable governments, prosperous wealth generating
economies and technically skilled populations. In other words, by
countries like Australia. Now there’s an alternative perspective for
you. If we want to have a real, as opposed to just a symbolic, impact on
stabilising atmospheric carbon, we should think about expanding, rather
than contracting, our share of the world’s coal supply.
editorial was republished by
On Line Opinion,
Australia's e-journal of social and political debate.