Issue 74, June 2011


Welcome to the sixth issue for the year of the newsletter. The energy sector is a whirlpool of activity in 2011 and this edition reflects some of the major currents flowing through politics and planning. The carbon tax debate may reach a peak late this month or early in July – when the federal government says it will announce the price – but it is by no means the only, or even the dominant, issue for the electricity sector.

More than 4800 pageviews per month

Going up

As the bar chart above illustrates, one effect of the ferment in the energy sector is a sharp rise in the number of stakeholders seeking information and analysis rather than spin. In April, the number of readers accessing the Coolibah site – to read this newsletter and its associated blog, This is Power – reached a record 4,843, more than 160 stakeholders a day. The average readership for the first four months of 2011 has been 3,990.

Fracking sense

The debate over coal seam gas is growing in intensity with every passing month, with the farming community on some of Queenslands richest agricultural land increasingly unhappy about the huge drilling program needed to realise the contribution of coal seam gas to national LNG exports and to domestic electricity supply, given the likelihood that, in a decarbonising economy, some 1,000MW per year of gas-fired generation will need to be added to capacity over two decades, much of it in Queensland and NSW.

The Greens have latched on to the farmer concerns and launched a ferocious campaign against CSG, already equally fiercely rejected by federal Energy Minister Martin Ferguson and the Australian Petroleum Production & Exploration Association.

Shell Australia chairman Ann Pickard, in a late-May interview with Business Spectator, has thrown a bucket of good advice to the upstream industry and government over the issue. Asked about the risks involved in use of fracking technology, which is critical to CSG production, Pickard responded: “Well, I don’t think it’s that risky and that’s part of educating the public. Fracking is a pretty normal part of the business – but, if we can’t understand ourselves and can’t educate stakeholders on this stuff, then we really don’t have a licence to operate. We need to spend our time educating people about this.”

This sensible advice should be at the top of the agenda, not only for the gas industry but also for sectors like wind farming where investors have also run in to increasingly vocal rural opposition, now the topic of a Senate committee inquiry.

Target: 10 Hazelwoods

Achieving Australia’s current 2020 abatement target – reducing carbon dioxide emissions to five per cent below 2000 levels – is the equivalent of closing down Victoria’s Hazelwood power station 10 times over.
This illustration of why the target is so challenging has been put to the Minerals Council of Australia annual conference by Blair Comley, new Secretary of the Department of Climate Change & Energy Efficiency.

The 2020 target, he says, is equivalent to 23 per cent below the latest estimate of “business as usual” emissions at the end of the decade. It is the equivalent of cutting emissions by 160 million tonnes from “business-as-usual.”

Comley adds that “160Mt is roughly equivalent to the emissions of 10 power stations the size of Hazelwood or around 80 per cent of current emissions from electricity supply.”

Electricity generation today accounts for 36 per cent of national emissions, Comley says, but it is expected to increase over the decade by only 12Mt (in annual terms) and to growth cumulatively by 122Mt from last year to 2020.

This, he explains, is partly due to the renewable energy target – “which is expected to have a significant influence on the deployment of new generation capacity over the decade” – and from existing efficiency measures, notably appliance and building standards.

Meanwhile, emissions from direct combustion of fuel by the mining and gas industries is estimated to increase by 29Mt (in annual terms) by 2020 with fugitive emissions from coal mines rising 27Mt/pa.

Comley also points out that the government is working on an estimate that, to contribute to the world having a 75 per cent chance of keeping temperature rises below two degrees celsius, Australia can emit no more than 1,000 gigatonnes of carbon dioxide between 2000 and 2050. Between 2000 and 2008 national emissions added up to 305 gigatonnes and, he says, could be 700 gigatonnes by 2020.

“If this occurs we will have have spent a large part of the budget in the first two decades of the century and will still have strong economic and population growth putting upward pressure on emissions in the decades to follow.”

Comley adds that, where the world pursues a 50:50 chance of holding down temperature rises, the Australian emissions budget for the first half of the century would be 1,440 gigatonnes.  (The 50:50 scenario envisages greenhouse gases in the global atmosphere being stabilised at 450 parts per million.)

Proponents of nuclear power in Australia will look at this arithmetic and ask what other zero-emission technology can deliver the electricity generation abatement required at a cost consistent with a “strong economy”?

C-day in sight

Australia’s electricity generators and retailers, as well as energy-intensive industries, are now in a nervous wait for C-day, when Prime Minister Julia Gillard and Climate Change Minister Greg Combet, possibly with the kind permission of the Greens and the federal parliament’s independents, will announce the introductory carbon emissions price and its attendant details.

There is concern in industry that, in fact, the C-day announcement will only express the minority government’s wishes and that the debate, and its attendant uncertainty, will roll on for months as Gillard and Combet negotiate for support for legislation, especially with the Greens, who will hold the balance of power in the Senate from 1 July.

Independent Rob Oakeshott and the Greens want a climate committee to recommend a carbon emissions target for parliamentary approval, an approach also mooted by Ross Garnaut, the government’s highest-profile adviser on carbon policy. Oakeshott has told journalists that the target issue could “blow up” negotiations.

Even when legislation is agreed, argues the Energy Supply Association, uncertainty will continue for generation investors because the tax will be an interim measure ahead of a proposed emissions trading scheme to be introduced later in the decade.

Industry is calling for an announcement that will not only nominate an opening carbon price and its escalator process – under the Rudd CPRS this would have been $26 rising to about $38 per tonne by the decade’s end – but also all the details of the subsequent cap-and-trade regime, the abatement target for 2020 and how it will be set for following years.

Garnaut, now embarking on an eight-speech tour of Australia in June while federal cabinet wrestles with a decision that could decide its grip on office, has created a high level of irritation in the coal-fired generation sector by proposing no compensation for the plants under the price regime. His suggestion of loan guarantees for generators that become distressed under the carbon scheme has been vigorously rejected by the electricity industry because, says the Energy Supply Association, companies in trouble will have no ability “to trade their way out of financial disaster.”

Generation businesses, some of whom need to roll over between $4.5 billion and $6.5 billion in loans by the end of 2012, have described Garnaut as naïve, glib, blinkered and demonstrating a lack of commercial reality.

Views abound on the opening price for the carbon scheme. The Business Council and the Australian Industry Group are calling for a “soft” $10 opening price, media commentators are suggesting that it will fall between $20 and $23 per tonne and Garnaut has proposed $26.

Meanwhile, the Energy Supply Association has described the views of Greens leader Bob Brown as “bizarre” after a television appearance in which he pointed out that Sweden has a $100 carbon price.

Sweden, the association retorted, relies on nuclear energy and large-scale hydro-power schemes for 95 per cent of its electricity supply. It is the third-largest producer of nuclear energy in the European Union.

Earlier in May, TRUenergy’s Richard McIndoe told the Herald-Sun newspaper that Victorian generators need 10 years to adjust to a carbon tax. He expressed fear that the Greens will push the Gillard government in to a corner. “They are looking for power stations to close down,” he said. “They don’t want to see the balance sheets of the existing generators kept intact. They are looking for businesses to go bust.”

When Greg Combet visited the Latrobe Valley in May, he told media the government would “provide a helping hand” and pledged he would protect jobs.

950,000 exposed

The Minerals Council of Australia has told a Senate committee examining the impacts of a new carbon pricing scheme that manufacturing and mining companies employing more than 950,000 people will be exposed to the world’s highest carbon costs under the federal government’s proposals.

Comparing the European Union emissions trading scheme to the Australian proposal, the MCA says that assistance is being provided to 164 EU industry sectors generating 73 per cent of the region’s exports while the Gillard government will provide safeguards to about 60 companies.

The Australian scheme, if set at $25 per tonne, will raise more tax from liable companies in its first three months, the MCA adds, than the European Union emissions scheme has generated since it was launched six years ago.

The association points to Department of Climate Change research to show that the Australian economy has been improving its carbon productivity at a faster rate than many other nations over the past two decades. In the Kyoto protocol’s tracking period (2008-12), Australia’s greenhouse gas emissions per billion dollars of real GDP will have declined by 44 per cent since 1990. “This far oustrips the 31 per cent improvement in the EU and a 25 per cent improvement in the United States.”

Under the proposed 2020 abatement target, the MCA says, local emissions intensity will fall by 45 per cent between 2005 and the end of this decade. “Under the target, Australia’s average emissions intensity per dollar of GDP will be well below the global average by 2020 and broadly consistent with most developed nations.”

The association argues that the principal beneficiaries of a CPRS-type scheme will be Australia’s competitors in global commodities markets. Most, it says, are in developing nations that have no intention of introducing a comparable scheme.

Using Centre of International Economics modelling, the MCA claims that the carbon price in Australia could reach $50 per tonne from about 2017 after the opening fixed-price phase ends.

Per capita fallacy

The Minerals Council submission to the Senate also attacks the use of per capita emissions by production to measure Australia’s contribution to global greenhouse gas output.

“In a globalised world,” it says, “focusing on production of emissions within national borders in the wrong way to measure a nation’s contribution. This ignores the fact that 33 per cent of Australian emissions are embedded in exports.

“Counting emissions on the basis of production rather than consumption exaggerates the contribution of exporting nations to global emissions and under-estimates the contribution of the wealthier, service-based countries that consume these exports.”

The MCA says research by the Policy Exchange shows that, when measured on a consumption basis, carbon dioxide emissions from 15 EU nations have increased by 47 per cent since 1990, although a comparison on a production basis shows that they have gone down.

“For the six largest EU member states, if emissions were counted on a consumption basis, the per capita tally would increase by more than three tonnes of carbon dioxide equivalent per person.”

It adds that work by the Carnegie Foundation has demonstrated that a quarter of global carbon dioxide emissions (or 6.2 billion tonnes) are traded internationally. Carnegie found that in a number of European countries, including Switzerland, Sweden, Austria, Britain and France, more than 30 per cent of consumption-based emissions are imported.

Cooling it

Fairfax newspapers claim that the Greens have given up hope in the current federal carbon policy negotiations of persuading the Gillard government to aim for a higher abatement target in 2020 than the current position of five per cent below 2000 levels.

The Greens’ policy is to demand cuts of between 25 and 40 per cent.

Climate Change Minister Greg Combet has confirmed to journalists that the government will take the commitment to a five per cent cut by 2020 to the UN climate change summit in South Africa in December.

Observers say this could mean that a legislated target for 2020 could be as far away as 2015 to 2017, depending on when the initial carbon tax is intended to give way to an emissions trading scheme.

Some electricity suppliers have warned that this will entrench uncertainty for generation investors through the decade.

Shift to the dark side

Easily the most controversial aspect of Ross Garnaut’s “final” report to the federal government is his proposal that a set of “independent” committees be established to set abatement policy, with policymakers relegated to the role of implementing the decisions or obtaining parliamentary approval to not do so.

Sinclair Davidson, professor in the School of Economics, Finance & Marketing at Melbourne’s RMIT University, writing on the ABC’s website, retorts that this idea would involve the committees setting what are really tax rates.

“We already have an independent committee whose job it is to set tax rates,” he says. “It is called the parliament. Unelected parliamentarians is a system of government that is undesirable and certainly inconsistent with Australian sensibility.

“The separation of powers at the core of our system of government relates to the power to tax. The executive proposes taxation and the parliament approves taxation. Right now even the parliament cannot force the executive to levy a tax. (Under the constitution) money bills can only originate in the House of Representatives from the executive and must be supported by the Governor-General.”

Under Garnaut’s proposal, the committees’ recommendations would become law if not over-ruled by the parliament within 60 days.

Investment stalled

Federal Resources & Energy Minister Martin Ferguson, releasing reports the government commissioned in to electricity investment uncertainty, says new capacity development has stalled.

“If you don’t get new investment in generation capacity,” he has warned in an ABC Radio interview, “the whole (electricity) system breaks down because the demand for energy in a vibrant economy continues to grow.”

LYP job cuts

Loy Yang Power is offering voluntary redundancies to staff as part of a program to drive efficiency.

The Latrobe Valley generator says the move is a response to lower than expected electricity revenue and increasing operating costs.

Chief executive Ian Nethercote says the company needs to deliver “significant” cost reductions and efficiency improvements over the next two years. This includes a need to reduce labour costs.

Panicky printers

Australia’s printers, in a submission to a Senate committee on the impacts of a carbon price, have expressed concern about the effect of rising electricity costs.

The 87-year-old Printing Industries Association says its members are exposed to a carbon price through rising costs for energy, transport and locally-produced paper.  Higher domestic input costs, it says, are exposing the industry to increasing competition from overseas.

Energy and paper prices combined represent on average 38 per cent of printing input costs.

It quotes a survey undertaken in April which found that a rise of 20 per cent in electricity costs or 10 per cent in raw material and transport costs would cause a decline in profitability in the sector of between 14 and 27 per cent and a fall in employment of between 11 and 15 per cent. When offshore competition prevents the pass-through of costs, plants could close. This could see total industry employment fall by 5,500 to 7,500. At present the sector employs 50,000 people across Australia.

The association says: “Printing industries strongly believe that the introduction of a carbon pricing mechanism will have negative impacts on Australian printers. The costs incurred will decrease profitability, causing plant closures and job losses (as well as) leading to carbon leakage through higher volumes of imported printed matter.”

The association’s government affairs manager, Hagop Tchamkertenian, says says the sector is not a high emitter and has succeeded in reducing its environmental footprint “considerably” over two decades, but it will suffer a negative impact if compensation or support is not available under the carbon policy.

In the absence of financial assistance, the sector wants a tariff imposed on imported printed matter reflecting the carbon costs incurred by local printers. It also wants government funding for a range of initiatives to help it further reduce its emissions and retain its competitiveness with overseas rivals.

High wires dudgeon

Carbon policy “guru” Ross Garnaut is not only upsetting the national power generation sector. Pressing on with his views about “goldplating” networks and “weak” regulation in his latest report to the federal government, echoing claims made by the large energy users reinforced by publication of a new consultant’s report in May, has got the wires businesses’ noses out of joint, too.

Reacting to the Garnaut report, Ausgrid managing director George Maltabarow, whose business has been renamed after the Keneally government sold the EnergyAustralia title to the private sector, has again rejected claims of over-investment in the networks sector.

However, Maltabarow acknowledges that changes are needed to the regulatory approach.

“Networks have been calling for greater regulatory incentives to meet the challenge of peak demand growth for some time,” he says. “The industry (wants) to create more demand management opportunities.

“Peak demand in all States has been getting worse – compared with overall electricity use – over the past decade, in part because of the greater use of air-conditioning. These worsening load factors are leading to increasing costs for both generation and electricity networks.

“Clearly, existing regulatory settings have failed and it is now time for a fresh approach.”

Maltabarow says the Garnaut review has based some of its network conclusions on a “misleading and inaccurate” report commissioned by big energy users. “This report has averaged so much data, while ignoring external and environmental factors, that its conclusions are at best irrelevant and at worst misleading.

“For example, it ignored such factors as higher gas use in Victoria and that NSW consumes 50 per cent more electricity across an area three times as big.”

In the case of Ausgrid, he points out, the capital works program is mainly driven by the need to replace infastructure built 40 and 50 years ago. “About half of our large electricity substations were built in the 1950s and 1960s. We have reached the stage where much of this infrastructure needs to be replaced. It is simply unsafe to neglect it. About 34 per cent of our assets are beyond their design life.”

Maltabarow also says that the Garnaut report has ignored the fact that a national transmission planning authority has been set up to facilitate a co-ordinated approach to investment in high voltage systems – as well as the point that the Australian Energy Regulator has factored in the cheaper cost (for a government-owned business) of borrowing money.

“There is no distinction in the rules that creates greater incentives to invest for government-owned businesses,” he argues.

More power price rises

Consumers in Western Australia, South Australia and Queensland have been told they face more power price increases from July.
In South Australia, the average household (consuming about 4MWh annually) will pay an extra $120 a year in 2011-12 after ETSA Utilities won an appeal at the Australian Competition Tribunal to enable it to recover an extra $301 million over five years through network charges.  The decision will push an average household’s bill in the State to $1,270 annually.

The Advertiser newspaper reports that a typical household will see its expenses on utility bills (power, gas and water) rise to $2,812 a year, up from $2,189 at present, over two years. These estimates do not take in to account an extra cost for the federal carbon price.

State Energy Minister Michael O’Brien says the extra networks costs include expenses on assets that are "worn out" as well as capex to increase the capacity of the system to deal with demand.

In Western Australia, the government has imposed a 4.6 per cent power bill increase on households, equal to about $208 a year for an average home, as well as a 8.5 per cent rise in water charges, amounting to another $104 a year.

State Treasurer Christian Porter says the electricity increase is “modest” when set against rises of 46 per cent over two years. The Barnett government, he adds, “has taken the difficult and unpopular decision to reverse years of no price increases (under Labor governments) and to move electricity prices at least within sight of the costs of generation and delivery.”

In Queensland, Premier Anna Bligh has defended the latest round of price rises, claiming that residential bills are still lower than those in other States. On a same-consumption basis, she says “Queenslanders are paying an average of nine per cent less than NSW, 12 per cent less than Victoria, 16 per cent less than Tasmania and 22 per cent less than South Australia.”

Energy Minister Stephen Robertson has expressed “disappointment” that the Queensland Competition Authority had approved end-user price rises of 6.6 per cent for 2011-12, higher than the 5.83 per cent it had foreshadowed in a draft determination in December.

The increase means that the average annual household bill (for 7.8 MWh consumption) of $1,781 will rise by $117.

However, the State government has intervened to stop its distribution businesses, Energex and Ergon Energy, from passing on extra costs permitted by the Australian Competition Tribunal (see above). It is also not allowing the two network firms to pass on to consumers the costs of dealing with recent natural disasters to consumers.

Bligh says that it should come as no surprise that it costs more to operate the Queensland network than it does the Victorian system. “Queensland is six times the size of Victoria.”

She adds that regional electricity consumers receive a $400 million subsidy from the government, equal to an average $580 per year per customer.

She also points to the impact on demand, and therefore capex, of high-energy appliances such as air-conditioning and plasma television sets. In 1999, she says, only 207,100 Queensland homes (23 per cent of the total) had air-conditioning. By 2009 this had risen to 828,000 homes (72 per cent) and the government expects a further increase to 81 per cent penetration in the south-east by 2015 and to 90 per cent in regional Queensland.

Big users’ beef

Releasing a study it commissioned from consultant Bruce Mountain, the Energy Users Association says the electricity industry reforms of the 1990s promised higher efficiency and productivity, lower prices and better services – “but they have delivered the opposite.”

The EUAA complains that prices charges by government-owned distribution businesses have more than doubled over 10 years with significant increases to come in the next four years.

Electricity prices have now become politically significant,it warns. “The tide has started to turn and the Australian community of household and business consumers is demanding explanations.”

EUAA says there is more to rising prices than a response to demand growth, replacement of ageing assets and “historic under-investment.” It claims that government ownership plus the regulatory system and the way it is applied are “the main causes of rising prices and declining productivity.”

The report says that, while the average price of generating electricity has remained roughly the same over the past decade, the average annual price of delivering it has increased by 3.5 per cent in constant currency terms. It estimates that distributors’ revenues will increase on average by seven per cent per year over the next four years.It says that “excessively high rates of return on regulated assets deliver windfall profits and stimulate inefficient over-investment.”

The report claims that reform could lead to government-owned networks cutting their expenditure in half to emulate their privately-owned peers. It calls for revaluation of the regulated assets of the government-owned distributors and a more prominent role in regulation for expenditure benchmarking.  “In the longer term, raising distributor efficiency will result in dramatic electricity price reductions,” it says.

Proxy for private angst

Economist Arthur Sinodinos, former long-serving chief of staff to Prime Minister John Howard, says in a commentary in The Australian newspaper that the carbon debate in Australia is not about the environment any more. “It has become a proxy for public angst over broken promises, cost of living pressures and even the divide between Canberra insiders and the rest of the nation.”

Sinodinos comments that the public wants something done about climate change, although its priority has fallen since 2007. “Forget the nuances about the contribution of humans as opposed to other causes,” he says. “The rubber hits the road when people are asked how much they are willing to contribute. The answer at the moment is not very much and, by the way, can you do something about my existing electricity bill?”

People understand, he argues, that only a global agreement will impact on climate change. They are willing to do their bit as long as other countries do not get a free ride on our efforts.

“No-one is falling for the Greens’ line that that is the polluters who will pay,” he writes. “People know the consumer pays in one form or another.”

Meanwhile the 30 May poll published by Essential Report shows that 48 per cent of those interviewed oppose carbon pricing versus 35 per cent supporting it.  The opinion poll shows that 22 per cent of respondents who propose to vote Labor oppose the policy and 16 per cent “don’t know.”

Sixty-three per cent of respondents believe consumers will end up paying the carbon price versus only 14 per cent who have bought the Gillard/Combet mantra that “big polluters” will pay and 13 per cent who believe consumers will be compensated for the price increases flowing through the economy. Respondents are evenly divided – 42 per cent on either side – about whether a federal election should be called on the issue.

While 52 per cent of respondents believe climate change is happening and is caused by human activity, 36 per cent are of the view that we are just witnessing a normal fluctuation in the Earth’s climate.


A new study by the CSIRO has found that Australians largely support the need for action on climate change, but are confused about it and about appropriate policy responses.

Undertaken for Ross Garnaut, the study reviewed 22 recent surveys of climate change attitudes undertaken by universities, CSIRO’s own units and the media between 2008 and 2011.

About 75 per cent of respondents to these polls believe the climate is changing, it says.

However the review points to the 2010 CSIRO “Baseline Survey,” which interviewed 5,036 people across Australia prior to the federal election and found that about half the participants believe humans are causing climate change. Just over 40 per cent consider it is due solely to natural causes.
Social scientist Zoe Leviston, leader author of the report, interprets community views that climate change is a natural phenomenon to constitute “a form of interpretive denial in which the facts themselves are not disputed but given a different interpretation.”

All groups interviewed listed “government, car companies and oil companies” as the least trustworthy for information on the issue. Those who believe climate change to be human induced favour information from environmental groups and environmental scientists.

Sunny side of the street

The solar power industry sees the commercial sector offering a substantial market opportunity, according to Mark Twidell, executive director of the Australian Solar Institute.

Speaking to the Clean Energy Council’s annual forum, Twidell pointed to the commercial sector using 22 per cent of electricity consumed in Australia and being accountable for 10 per cent of national greenhouse gas emissions. By 2029-30, the commercial market could account for 32 per cent of consumption.

There are hardly any solar PV panels on commercial buildings today, he said, because businesses are offered no incentive to take them up.

In a separate interview with the Newcastle Herald newspaper, Twidell said that, for the solar industry to be sustainable in the long term, it had to be able to deliver its technology to consumers at a price that did not require a government subsidy.

Meanwhile the CSIRO is predicting that by 2050 about 30 per cent of Australia’s energy supply will come from solar power.

Carbon capture cut

The Australian Coal Association has decried the Gillard government decision in the federal budget to cut $470 million allocated to carbon capture and storage projects from forward estimates.

ACA chairman John Pegler says the decision is “wrong” and will reduce the industry’s ability to contribute to carbon abatement. The decision is also poorly times, he says, coming on the eve of the government’s proposed introduction of a carbon tax.

“Carbon capture and storage is a key technology that will ensure Australia continues to enjoy record revenues from coal exports over the longer term. (The decision) sends the wrong signal to our major coal customers globally that the government is only a lukewarm supporter of CCS technology.”

Chinese emissions

The federal government has told a Senate estimates committee that Chinese greenhouse gas emissions in 2008 from fuel combustion were more than 16 times greater than Australia’s. Department of Climate Change Secretary Blair Comley said 2008 Chinese emissions from fuel combustion were calculated by the International Energy Agency to 6,550 million tonnes compared with 397 million tonnes in Australia.

Merkel’s gamble

As the world’s governments check their summer wear for a trip to the UN decarbonisation summit in Durban this December – think Queensland at its sweaty “best” – more than a few of them will be looking sideways at the Germans.

The decision by Angela Merkel’s government, in the wake of the Fukushima disaster in faraway Japan and in the depths of major political trouble at home, to phase out nuclear energy by 2022 throws a large spanner in the abatement works.

As strategic consultants Stratfor point out in an early June consideration of the implications of Merkel’s decision, whatever the German government rhetoric about turning to renewables, the only viable energy source to replace nuclear energy is gas.

Which is why Merkel’s Economy Minister Philipp Roeslet was despatched to Russia the week after the decision was announced. Germany, which already relies on Russia for 40 per cent of the gas it consumes, will need much larger supplies to supplant nuclear power, which today makes up a little less than a quarter of its power generation.

All nuclear reactors are not going off line together, of course, so Germany has time to wheel and deal for gas supplies. But Stratfor is of the view that it has no other choice than gas to fill the growing gap for at least the next five years. Bigger efficiency programs, larger use of renewable generation and fast-tracking domestic development of shale gas cannot happen overnight or without huge injections of capital.

The shift places strong new emphasis on the underwater pipeline, dubbed Nord Stream, that comes online this year and in to full projection in 2012 to deliver gas directly from Russia to Germany without use of the network through the Ukraine and Belarus,

Nord Stream, warns Stratfor, could become “a dangerous gateway” towards an addiction to Russian gas, particularly if Moscow keeps the price down for the time being. “Berlin,” says the consultancy,”is consciously placing a domestic political issue over a considerable geo-political strategic concern.”

Despite Merkel’s decision, western Europe is not about to give away nuclear power. Thirteen other EU nations use nuclear. France (58) is the most reliant on nuclear power and has two more plants in development. Britain (19) plans to build another eight. Nine other countries have plans to develop reactors.

While giving up its own reactors, Germany is also expected to increase its purchases of nuclear energy from France. It is presently calling on the output of about 2,000 MW of nuclear power from France following its initial closure of seven older power stations in reaction to Fukushima.

Meanwhile China has 26 nuclear power stations under construction and another eight in the planning pipeline. It accounts for 44 per cent of the world’s present nuclear construction program.

Worldwide, in 2010 seven new reactors were added to the power system and 11 shut down. Since Fukushima, there have been 14 reactors closed in Japan and Germany, leaving 423 operating around the globe.

No deal in Durban

International observers are dismissing the prospect that the UN climate change summit in Durban, South Africa, can produce an outcome that will enable a new global agreement to succeed the Kyoto treaty, which expires at the end of 2012.

Developing countries are expected to push for the Kyoto treaty to be extended, but already Japan, Russia and Canada reject this approach.

“It is almost impossible to see a legally binding agreement (emerging from the Durban talks),” says Akira Yamada, who is leading the Japanese negotiating team at the run-up talks in Bonn, Germany, during June. Earlier negotiations in Bangkok ended in stalemate.

The other huge sticking point in the negotiations is the impasse between the United States, which has never ratified the pact, and China, which is not bound by Kyoto’s abatement requirements as they apply to “rich” developed nations.

The American position is to call for “legal symmetry” in a new treaty under which China would also commit to abatement targets.

Absent progress on a new treaty, observers expect the focus of negotiations in Durban to fall in the main on the proposal raised at Cancun, Mexico, last December for a transfer of $US100 billion a year between developed and developing nations to promote low-emission technologies. Curbs on deforestation are also expected to come to the fore.

Naming the price

Global carbon traders, responding to a survey undertaken by the International Emissions Trading Association, say it will require a price of almost $US87 per tonne to enable the European Union to meet its pledge to drive down greenhouse gas emissions to 80 per cent below 1990 levels by 2050. Current EU prices are below $US23.


The role of the media in Australia’s political carbon war is important because what they report and how they present information influences public attitudes that, in an environment where opinion polls and focus groups drive considerable policy decisionmaking, then impact on government and opposition leaders.

Because few Australians read more than one newspaper, the way in which Murdoch publications present carbon and energy affairs tends to be more influential than that of Fairfax publications for the general public – a factor of a substantial higher readership of the News Limited tabloids in Brisbane, Sydney, Melbourne, Adelaide and Hobart plus its flagship The Australian versus The Age, the Sydney Morning Herald and the Australian Financial Review.

When the focus is on opinionmakers – in business, academia and so on – the situation is probably reversed because of the greater number who are claimed to read the two Fairfax broadsheets plus the “AFR” versus The Australian.

Canberra and its newspaper, of course, is a different topic – books could and should be written on the “inside the beltway” thinking of those who live in the national capital, its small outlying villages and Queanbeyan over the border in New South Wales and who staff the federal public service.

In addition, many Australians’ perspectives are influenced by what they hear on talk-back radio – mostly pro-carbon cut measures on the ABC versus strong criticism of end-user costs on commercial stations – and probably to a smaller extent by what they see and hear on television.

An example of the genre could be found in the 4-5 June issue of the Financial Review where considerable prominence was given to a feature on “Why Australians waste electicity” which was hung on the peg of greater use of air-conditioning, home entertainment appliances, fridges and so on.

The Greens and their fellow travellers, along with many of the commentariat, may see this as “waste” but it is a safe bet that very few ordinary Australians (aka the majority of voters) see it in the same light and are willing to be punished for it.

Despite the many journalists reporting on the decarbonisation issue – or perhaps because of the herd instinct that seems to typify the media approach – significant points can be easily ignored and the community left in the dark.

A good example was the estimate two years ago by Port Jackson Partners for the Business Council that end-user power prices in 2015 will be double what they were in 2008. 

This is of major economic importance, but it was ignored by 98 per cent of journalists because it did not suit either (then opposition leader)  Malcolm Turnbull’s or the BCA’s book to really take the issue up to the Rudd government.

Even now, although the forecast has become more common currency, following the Australian Industry Group making the same point earlier this year, not a single major newspaper or electronic current affairs program has pursued in depth what this development means for householders and businesses and for the economy as a whole – and this despite acknowledgement that power prices are a “white hot” issue in the community.

In the same vein, 29.3 per cent of electricity consumption in Australia (more than the volume used by households) is to the account  of the metals sector and aluminium smelting, businesses constantly warning that they are at risk here in a high carbon price environment, but there has been no comprehensive media investigation of what this could mean to the community – rather a slavish adherence to the view that corporate concerns can be dismissed as “big polluters” posturing.

I can find no media reporting of last month’s Minerals Council submission to a Senate committee (see above) that 950,000 manufacturing and mining jobs will be affected by a carbon price.

Embedded in the mainstream media’s attitude apparently is the view that giving their readers, viewers and listeners the best possible analysis of the facts and allowing them to make a personal  judgement is not the journalists’ role. Reporters and commentators make their own judgements (demonstrably on poor understanding in many cases) and report and comment accordingly.

In another current example of the media misfiring,  not a single mainstream source has reported the really important comment about Australia’s long-term greenhouse gas emissions “budget” by Blair Comley, Secretary of the Department of Climate, which is highlighted in this newsletter (see “Target:10 Hazelwoods” above).

This was not mumbled in a corner somewhere, but delivered as part of a speech to the Minerals Council annual conference, which was crawling with “journos” looking for “color” pieces on a confrontation between Gillard and the miners.

Comley points out that, even if the world opts for pursuing a 50:50 chance of keeping the global temperature increase to two degrees celsius, Australia will have an emissions “budget” of just 1,440 gigatonnes of carbon dioxide in the first half of this century – and we will be at half of this cumulative output by 2020 even allowing for abatement measures.

Pursuit of a 70 per cent chance of restraining forecast temperature rises would reduce this “budget” to 1,000 gigatonnes by 2050.

If policymakers accept this thesis – and it is beyond belief that a senior public servant would be using it in a speech without government leadership knowledge – then energy policy development is cast in a wholly different light.

Stationary energy now contributes half of national emissions and electricity supply 36 per cent, so a very tight carbon “budget” beyond 2020 – which is well within current investment timing horizons – is not a minor matter.

It must be factored in to today’s energy strategies and, for example, resonates in a major way with the current barriers to nuclear power in this country. 

But, until now, you won’t have read or heard about it through our media.

Nor, of course, is it remotely in the political interests of the Prime Minister, the Treasurer and the Climate Change Minister to brief the voters on this carbon “budget,” although they are happy to wave around modelling of the possible impacts of potential sea level rises on Australian cities as a result of higher levels of warming by the end of the century – and get widespread media coverage of their doing so.

Scaring the voters so that they follow “Carbon Cate” and just say “yes” to the carbon price is fine, it seems  – laying out the full picture and spelling out its implications (not the least of which is whether Australians actually want to commit to the major changes pursuing this “budget” will require from now on) is not part of the game plan.

The truth of the matter is that the Gillard and her leadership team are engaged in a cynical game to regain majority government by demonstrating to voters that they are leaders in “saving the planet” while hiding the full implications of  this country “punching above its weight” in global negotiations.

By reporting too much of the spin and the hot air emitted by debate between the political parties, along with endlessly running “he says, she says” exchanges between stakeholders in business and the environmental movement, and failing to take up and analyse  important information when it becomes available,or indeed to dig until it is found, the mainstream media commentariat is not the watchdog of the people but the poodle of the politicians.

Keith Orchison
6 June 2011

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