Issue 26  February 2007

Coal fired up

The Australian coal industry has been quick to respond to the calls for an end to exports of the fuel from Australia.

"Imagine the consequences," says the Australian Coal Association's Mark O'Neill, " if all energy-rich nations decided they would no longer share their resources. Anyone following the debate could be forgiven for thinking that coal is almost solely responsible for global warming, that Australia is flooding the world with the stuff and, if we stopped doing so, the problem would be solved."

The reality, as O'Neill points out, is different: more than 75 per cent of man-made global greenhouse gas emissions are not coal-based, 1.3 per cent of emissions flow from use of Australian coal exports and only a small proportion of the coal used around the world is actually traded. Australia's share of world coal production via exports is 4 per cent. He adds that Australia's share of global greenhouse emissions from burning coal within its borders is 0.4 per cent.

The Coal Association reports that Australia produces 300 million tonnes of black coal a year, 6 per cent of global output. (Domestic consumption of black coal is more than 55 million tonnes a year.)

O'Neill points out that more than half of Australia's high quality coal exports go to steel mills not power stations.

The other side of the coin for Australia is that its coal exports generate $24 billion in income -- more than the revenue earned from wool, wheat, wine, copper, dairy products, beef and gold exports combined -- and provide direct and indirect employment for 130,000 people.

The Coal Association was responding to calls for a radical change in Australia's approach to coal from a number of high-profile lobbyists and Green politicians, including Clean-Up Australia head Ian Kiernan who was widely reported by the media as saying that Australian coal contributed "a frightening amount" to global greenhouse gas emissions.

Meanwhile the New South Wales Minerals Council has launched a roadside billboard publicity campaign supporting coal with the theme "Life brought to you by mining." The initial phase of the campaign is focused on the Hunter Valley and Illawarra, major coal mining regions.

Howard's way

The Prime Minister is holding doggedly to his realism line on global warming policies.

In a radio message on climate change in early February, John Howard pointed to "multi-million dollar investments" in clean coal technology, solar power and other renewable energy sources as evidence of his government's willingness to tackle the issue while being "sensitive to the nature of our industries, our major power sources and our natural abundance of fossil fuels." 

His forward strategy, he repeated, looks to clean coal technology, the possibility of nuclear power and the use of renewables. His mantra on the issue is that the government will put forward "practical and sensible measures" to tackle climate change. In a radio interview in the West, he conflated this point with a comment that one of the main things that decide elections is which party is best able to guarantee the continued prosperity of the country. 

In his Menzies Research Centre speech this month, he pointed out that the economy is 40 per cent larger than it was 10 years ago and asserted that Australia was moving in to a "rather more difficult" phase of economic management where the risks of policy error are greater.

The line from his weekly radio message -- a carefully crafted commentary with no prospect of impromptu mis-speaking  -- that intrigued close government watchers was "market mechanisms, including carbon pricing, will be integral to any long-term response to climate change."  This raises the question as to whether the Howard Government is considering a carbon tax in its May Budget?

Meanwhile the task force Howard appointed to look at "the design and nature of a workable emissions trading system" is continuing its work -- and Origin Energy chief executive, Grant King, has told ABC Radio that power companies planning large, long-lived projects need a commitment to introduce an effective carbon pricing regime.

King points out that a carbon charge, by definition, has to put up the price of electricity in order to change the pattern of power generation and emissions.  The scheme, he adds, would need to "anticipate some future global carbon regime" and be implemented gradually to avoid economic dislocation.

A rather different perspective can be found in the OneSteel and BlueScope Steel submissions to the state governments' study of emissions trading.  The latter, Australia's largest listed manufacturing company and one of the nation's biggest energy consumers, opposes any carbon regime that compromises its international competitiveness. OneSteel, which employs 7,000 people in Australia, points out that getting a carbon charge regime wrong will "place the iron and steel industry at a significant disadvantage to its international competitors." 

The context of all these corporate comments is that the firms want a secure forward strategy on greenhouse gas emissions, but fear that "unintended consequences" of policy will bring them undone.

CoAG in April

The Prime Minister has signalled that he will call the first 2007 meeting of the Council of Australian Governments in April -- once the NSW state election is out of the way -- and  will have energy issues high on the agenda.

In his Menzies Research Institute speech, John Howard said he was looking to build on the Energy Reform Implementation Group report -- still not released publicly, but believed in the electricity industry to call for a national transmission planning authority -- with the agreement of state and territory first ministers. "I believe the next meeting should set a timetable for achieving a truly national electricity market and transmission grid," he added.

The Howard Government will also use the April CoAG meeting to seek to set a timetable for a "rapid national smart meter rollout."

Fitch flags nuclear hurdles

Fitch Ratings says a number of regulatory and operational hurdles will need to be cleared before investments in an Australian nuclear generator can be undertaken.

Fitch's Asia-Pacific Energy & Utilities team leader, Gavin Madson, says the current uncertainty surrounding greenhouse gas management in Australia has hindered investment in any baseload generation, let alone nuclear power.

Madson adds that the considerable upfront capital cost and lengthy construction timeframes of nuclear generation heighten the need for regulatory clearance prior to investment -- nuclear-powered economies generally have a regulatory body dedicated to nuclear generation issues.

Madson points out the huge capex difference between nuclear power and conventional generation: a 1,650 MW plant planned for France is scheduled to cost $5.5 billion versus $1.2 billion for the 750 MW Kogan Creek supercritical coal-fired plant currently under construction in Queensland. A nuclear regulator, he says, is needed to provide investor surety in Australia over licensing, planning and approvals, safety regulations, operating of operational standards as well as the measurement and provisioning of decommissioning costs.

Madson also highlights another major difference between nuclear and conventional power stations: "The large scale of individual nuclear plants, their high capital costs and overheads, and stringent safety regulations cause these facilities to have a low incidence of failure, but a high economic and environmental consequence of outage or failure." One plant in Kansai, Japan, he adds, has just resumed operations after being closed for two years following a fatal accident.

The Fitch analyst also brings his observations round to the issue of a carbon charge in Australia. " While the world-wide interest in nuclear power generation has been driven by the increasing costs of alternative fuels and environmental concerns, the low-cost of coal-fired generation in Australia ensures that any decision to invest in nuclear generation in the foreseeable future will likely be driven by the level of cost applied to the emission of greenhouse gases."

Blackouts loom, NZ warned

New Zealanders have been warned by their leading industry figure, Keith Turner, chief executive of government-owned Meridian Energy, that there needs to be major investment in South island's transmission grid within five years to avert blackouts in Christchurch and to enable renewable energy projects to be brought in to the market.

Turner argues that the national grid operator, Transpower, and the Electricity Commission have not addressed the problem adequately and he warns that time is running short to implement a remedy.


The continuous use of "war" as a metaphor for the global warming issue by so many of the adherents of the theory that we are now in an emergency situation may be music to the ears of journalists but it should jar on the rest of us.

War, by definition, is the ultimate in emergencies. Losing is not an option, so those engaged in a war excuse excesses as the means justifying an end. (In the Cold War the American Rand Corporation, for example, argued that a logical approach to rationing access to public nuclear fallout shelters would be to let in children and exclude their parents.............)

One of the key issues about the US, Australian and British arguments in favour of the Iraq War is how the attack was justified; in the same sense, demanding a war footing approach to how we operate the economy and society in the face of global warming skips much too lightly over all the approaches that could be pursued before recourse to "war."

It is notable in the latest IPCC  summary report on global warming -- a document of 21 pages, seven of them containing charts, designed to be read by policymakers (ie politicians) --  that "virtually certain" is used only twice in the conclusions, "very likely" 18 times, "likely" 26 times and "more likely than not" six times.

Given the media focus on the point, it is also worth highlighting that the summary considers that global temperature rises by 2100 are unlikely to be less than 1.1 degrees or more than 6.4 degrees -- whereas the much-hyped Stern Report includes temperatures as high as 11.5 degrees in its economic estimates.

Even more interesting in the light of the alarmists' focus on it is what the summary says about a rise in sea levels.  It concludes that, under the temperature forecasts it embraces, a rise of between 18 and 59 centimetres is possible. Gore's award-winning film postulates a rise of six metres in the same time frame.

Larger rises, the IPCC summary observes, cannot be excluded but "understanding of these effects (ie melting of polar ice) is too limited to assess their likelihood or provide a best estimate for sea level rise."

The summary was drafted by scientists but vetted line-by-line by governments' representatives. The exercise was not a scientific one, but designed to create a message to be useful to policymakers.   Notwithstanding what some  politicians and many environmental advocates  may say, it is noteworthy that not even in this document does the IPCC assert that the debate on climate change is over -- which didn't stop the London "Independent" newspaper from headlining its report of the document as  "The final warning."

Moreover, the report of the IPCC working group on adaptation to climate change -- an issue of far less interest to journalists and virtually no focus by war-mongering radicals -- has not yet been published. It will deal with how to refashion agriculture, coastal communities, industry, services and other issues in a warmer world.

The bottom line is that the warmongers of climate change are cherry-picking (and inflating where it suits their purpose) the most formal of world government papers on the issue. Even the BBC -- in its equivalent of ABC-TV's "Lateline" --  couldn't resist announcing in its report on the summary, accompanied by mournful music and spooky computer graphics,  that   "2,500 experts agree: climate change could result in catastrophe."  Well, no and no -- at least with respect to what was being covered by the television report.

What also did not get reported was the response to journalists by Dr Susan Solomon, one of the contributors,  at the IPCC media launch of the summary. Solomon is a leading scientist with the US National Oceanic & Atmospheric Administration. Pushed by journalists to enunciate on the urgency of the situation, she responded: "I believe science is one input to the choice (of action) and I believe that science can best serve society by refraining from going beyond its expertise. So I do not believe that it would be in the best interests of society for me to push for urgency or action."

Hardly the basis for the emotional spasms by people like Tim Flannery and the emotive language of war to which we are now being exposed in the media on almost a daily basis.

Keith Orchison

28 February 2007

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