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Existing carbon markets better than new technologies for Australia’s net zero target

A lot can happen in 30 years, which makes pretty safe ground for anyone who makes promises for 2050, especially if it’s unlikely to be there at all.

With all the hot air and emissions produced in Glasgow last week, Australia appeared to be a front runner, despite the Prime Minister’s switch to Damascus to produce net zero carbon emissions by the middle of the century.

The plan for net zero

The government is committed to net zero by 2050 and is well on its way to meeting its emissions targets for 2030. But what does it take to make Australia green?

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As dramatic as this shift may seem – given the prime minister’s recent deliberations on everything from deficiencies in electric vehicles to the need for a gasoline-powered recovery from the COVID-induced recession – he has overcome a lot of flak detailing for its noticeable deficiency how we will achieve the goal.

Not surprising. Because it’s going to be a mammoth task that brings a lot of pain and displacement for regional communities that rely on coal mining – and that’s never a big selling point in an election.

The path to net zero emissions, however, will not be achieved by governments pouring money into untested technologies like clean coal or carbon capture and storage. It is achieved on the financial markets via a price for CO2.

Scott Morrison speaks while holding up a booklet for reading Prime Minister Scott Morrison may have envisioned a net-zero plan, but the reality of achieving it will be painful. (ABC News: Ian Cutmore)

Coal may be a cheap source of energy, but only if you exclude the cost of the environmental damage it causes.

Ironically, given his attitudes towards climate change, former Prime Minister Tony Abbott inadvertently set the framework for a carbon price when he lifted Julia Gillard’s carbon tax. And that price will ultimately determine our energy and emissions future. More on that later.

10 years of inertia in terms of climate policy

An illustration starring Tony Abbott, Andrew Robb, Malcolm Turnbull, and Kevin Rudd

A decade ago, one man’s plan irrevocably disrupted Australia’s two major parties as they neared consensus on climate change, the most divisive issue of the Australian political century.

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Australia is one of the world’s largest exporters of fossil fuels.

We are the second largest coal exporter to Indonesia, and we are level with Qatar for world supremacy in liquefied gas supplies, which may horribly expose us to a sudden move away from fossil fuels.

Coal exports last year totaled nearly $ 55 billion and gas supplied $ 36 billion. And that during a global recession.

This year will be much higher, especially given the energy shortage that is currently wreaking havoc around the world.

That’s a lot of money that, unsurprisingly, is attracting a lot of political pressure from those who have a real interest in maintaining the status quo.

We are the winners

We’re perhaps nowhere near the largest emitter of carbon – this award goes to China, which accounts for more than a quarter of the world’s annual emissions – but given our exporter status, we make the fuel available to everyone else.

And when it comes to personal use, we certainly hit way above our weight.

Australians pump out more carbon per capita than almost anyone else.

At 15.5 tons each, our per capita emissions are roughly twice as high as those of China and, according to World Bank statistics, only exceeded by the oil-rich countries of the Middle East.

Much of this comes from burning coal to generate electricity. While this has declined in recent years as renewables and gas have replaced aging generators, our oil consumption has remained relatively constant while gas has increased.

On a per capita basis, our emissions have fallen sharply since our peak of 18.5 tonnes in 2007, which sounds like progress.

Keep in mind, however, that Australia ran one of the largest immigration programs in the developed world, so we are now spreading those emissions across a larger number of people.

CO2 emissions by fuel type Australia Our world in Data VerrenderThe rise in emissions in Australia since World War II will not be reversed without radical action.Delivered: Global Carbon Project)

What cannot be overlooked is the spectacular increase in annual emissions since the post-war period.

This will be extremely difficult to resolve by 2050 without radical action.

Coal power plant already on the way

The world may have gone digital, but when it comes to looking into the future, we’re analog up to our armpits.

What is a carbon tariff and why is Australia being devastated by it?

A young woman holds a sign that says

There is growing pressure on Australia to develop serious climate protection policies or to pay millions for our emissions.

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Everything, it seems, requires a road map with pictures of bridges, chasms and a destination.

The path to net zero may be cloudy with fog at the moment, but the markings are obvious.

First of all, every single coal-fired generator must be shut down far earlier than planned in order to be successful. Almost a third has closed since 2012.

It goes without saying that nothing will ever be built in Australia again, at least not with private capital.

Banks do not finance them and are not competitive even without a carbon price, especially if you include construction costs.

Even before the federal government switched to net zero, the Australian energy market operator only had one system that should still be in operation until 2050, Victoria’s giant Loy Yang A.

Generator shutdown schedule

Shutdown plan for coal-fired power plants GRAPH Verrender (1)Many operators are expected to close generators early. (Delivered: AEMO)

This schedule is already out of date. Energy Australia recently announced that it would retire Mount Piper two years ahead of schedule and other operators are likely to follow suit.

With the recent change in policy, most would now be reassured that they would not face the political storm that erupted following the AGL announced closure of the obsolete Liddell plant in New South Wales’ Hunter Valley.

Why carbon pricing is inevitable

Given the vicious debate that ensued after Julia Gillard introduced a carbon tax – which economists love almost everywhere, but which are election poisons – it went virtually unnoticed that Tony Abbott later introduced a system that prices carbon.

Abbott’s Emissions Reduction Fund initially distributed billions of dollars to major polluters through a system that created Australian Carbon Credit Units.

COP26 in the sandIn Glasgow, the world’s 20 largest energy companies committed to offsetting their CO2 emissions by purchasing CO2 certificates.Getty: Christopher Furlong)

However, in 2018 some of the biggest polluters were forced to buy units on the open market because they didn’t meet minimum standards.

They paid around $ 15 per ton, well below the tax of $ 23 per ton under the Gillard administration.

But now the tide has turned and last week, after the first week of the Glasgow Summit, these units hit a record $ 36 per tonne.

Even at this price, Australian credits are cheap by global standards, largely because of our lax emissions regulation, a situation that is likely to change soon in light of the net zero emissions pledge.

It is “time to rethink our dreams of changing lakes and trees”

Bushfire and red sky with houses in the foreground.

Scattered dwellings in “endangered” areas need to be replaced by sustainable, resilient community models, according to researchers.

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Although there is no global price for CO2 – Europe and many other countries go it alone by different systems – financial markets are preparing for what is likely to be a huge new trade regime.

Last week in Glasgow the world’s 20 largest energy companies committed to offsetting their CO2 emissions by purchasing carbon credits.

Those who remove carbon from the atmosphere earn credits. Those who pump carbon into the atmosphere will have to buy these credits to offset their emissions.

The reason the price of these credits skyrocketed – with some increasing by a factor of 10 in the past 12 months – is because the biggest issuers suddenly realized they had to buy huge quantities if they got the chance want to offset their CO2 emissions.

That created a massive shortage.

The higher the price, the more expensive it will be to produce and use dirty fuels, and the faster the industry will move to newer and cleaner technologies.

And the market already exists here.

Rather than paying taxpayers to experiment with radically new technologies, it would be far more efficient for Australia to connect to global carbon markets, set goals and allow the industry to make rational decisions about how best to achieve them can.

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