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Australia is nuts in agreeing to adopt Net Zero

By Brendan O'Reilly - posted Thursday, 13 January 2022


The Morrison Government (in the run up to the COP26 talkfest in Glasgow) promised that "the Coalition will act in a practical, responsible way to deliver Net Zero emissions by 2050". The Government and the Labor/Greens Opposition now seem to only disagree in respect of detail. Consequently, it seems that, on the face of it, the end of cheap and reliable coal, gas and petroleum-based energy in this country is nigh.

New suburbs in places like the ACT are no longer being connected to gas. Motorists around the country also look like being forced to buy electric vehicles, that currently struggle to tow a trailer or make a long trip. Meanwhile, coal-fired generators are being forced out of the energy market by rules that favour expensive intermittent "renewables". Even state-owned coal-fired electricity generators are now in a parlous financial situation.

At next year's federal election voters will be asked by all major parties to affirm Net Zero, along with a further raft of taxpayer-funded green energy subsidies. The political choice now seems to be between Tweedledum and Tweedledee.

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Zero CO2 emissions, almost by definition, is an impossible target.

Firstly there is the huge financial cost (estimated at US$120-160 trillion worldwide). Secondly there are unavoidable emissions such as outgassing from the ocean, decomposing vegetation, venting volcanoes, naturally occurring wildfires, and exhaling by humans and animals. Even if all electricity is generated by so-called "renewables", the wind towers and solar panels don't come from thin air, and also require substantial energy for their production. The energy for steel production (that goes into wind turbines) is mostly sourced from coking coal, while solar panels (especially if made in China) are made using mainly coal-fired electricity for energy.

In a literal sense, there is also no such thing as "renewable energy". The first law of thermodynamics states that energy can neither be created nor destroyed, and can only be transferred from one form to another. So called "renewables" are really just collection systems that harness intermittent low level energy, that is ultimately generated by the Sun.

Net Zero Emissions seeks to offset (reduced) CO2 emissions, usually by planting trees. Critics point to issues of timing, permanence, and the risk of later carbon release with tree planting projects, so that the practicality of even Net Zero is also questionable.

Trees take decades to reach maturity but often the promised reductions in CO2 are sold up-front in a practice known as "forward selling". It is also difficult to guarantee the permanence of planted forests, which may be susceptible to clearing, burning, or mismanagement.

Net Zero is being pushed by a mixture of noisy zealots and carpetbaggers, who have succeeded in petrifying much of the public about global warming and weather extremes. Many of the forecasted effects of "global warming" (e.g. rising sea levels, a destroyed Barrier Reef, disappearance of Arctic ice) either have not happened or have been far less extreme than predicted. Every adverse weather event seems to get blamed on "climate change", though extremes of low temperatures or favourable weather patterns are conveniently ignored.

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There are also a range of practical and political problems that arise in attempting to reach Net Zero by 2050, which is looking an increasingly hopeless cause internationally. Arguably, even for the small number of countries reducing their emissions, most are merely outsourcing their CO2 and heavy industry to China and India.

Through the 1990s, China's production of steel hovered at around 100 million tonnes per year. After WTO membership, it exploded to around 700 million tonnes by 2012, and exceeded one billion tonnes in 2020. China now accounts for a massive 57 per cent of world production, and produces significantly more steel on its own than the rest of the globe had managed together back in 2001. The same goes for plenty of the other ingredients of industry.

None of the four biggest emitters of CO2 are expected to do much to reduce emissions. China is the largest emitter (10 billion tonnes in 2018).

· The primary source of CO2 emissions in China is coal. About 58 per cent of the total energy derived in China came from coal in 2019, and it is also a huge importer of oil and gas.

· In 2020, China brought 38.4 gigawatts of new coal-fired power into operation, more than three times what was brought on line everywhere else. A total of 247 gigawatts of coal power is now in planning or development, nearly six times Germany's entire coal-fired capacity.

India is the third-largest emitter of CO2 in the world. It produced about 2.65 billion tonnes of CO2 in 2018. Coal as a source of electricity in India has risen from 68 per cent in 1992 to about 75 per cent in 2019.

Russia is the fourth largest contributor to CO2 emissions in the world with 1.71 billion tonnes in 2018. It again shows little interest in green energy. Russia has one of the largest natural gas deposits in the world, and natural gas is its primary source of energy and power generation. Coal is also widely used in Russian industry and power generation.

The U.S. is the second-largest emitter of CO2, with approximately 5.41 billion metric tons of CO2 emissions in 2018. U.S. net emissions declined13 per cent from 2005 to 2019 due to a range of market and policy-related factors. Electric power sector emissions fell 33 percent, mainly as a result of a shift from coal to natural gas. There was also a levelling of electricity demand, and increased use of renewable energy.

Senator Joe Manchin, a conservative Democrat, said that he won't support the Biden administration's "Build Back Better" plan. Manchin's decision will likely kill the $1.75 trillion social spending and climate policy bill The bill included US$555 billion worth of subsidies over a decade to reduce carbon dioxide emissions. This included a $12,500 subsidy for the purchase of a US-made electric car built with unionised labour, and US$320 billion of tax deductions for suppliers of wind and solar energy.

With the US Senate likely to knock back Net Zero legislation, and a strong likelihood of a surge in support for the Republicans in coming rounds of elections, the long term future of Net Zero in the US does not look good.

Altogether, none of the world's major economies, including the entire G20, have a climate plan that meets their obligations under the 2015 Paris Agreement. The watchdog Climate Action Tracker (CAT) analysed the policies of 36 countries, as well as the 27-nation European Union, and found that all major economies were off track. These countries together make up 80 per cent of the world's emissions.

Overall government measures across the globe against greenhouse gases have only had a trivial effect. Emissions had barely paused and are now again rising. This is because the nations promising Net Zero are only responsible for 30 per cent of emissions (a figure that drops to a mere 15 per cent if the US is excluded), and many of these are not expected to honour their commitments.

According to the International Energy Agency, to achieve net zero, clean fuels will have to increase from the current 15 per cent of total energy consumption to 55 per cent or higher by 2050 or earlier. Despite pledges by governments, and all the hysteria that the likes of Al Gore, David Attenborough and Prince Charles have been able to create, CO2 emissions have increased by 60 per cent since the UN Framework Convention on Climate Change was signed in 1992.

If current expectations for a global economic rebound are confirmed, global emissions are likely to keep rising over the next few years. The International Energy Agency is predicting at least three years of surging demand for coal, just weeks after world leaders failed to agree on its phase-out. "All evidence indicates a widening gap between political ambitions and targets on one side and the realities of the current energy system on the other," the IEA said.

To turn to Australia, what do you think is our biggest export? While iron ore, our biggest single export by value (21.6% share), gets all the publicity, the correct answer is that fossil fuels (when added together) actually are number one.

From about 2019 iron ore had spiked in price due to the Chinese construction boom and production problems in Brazil. Since the start of 2021, however, the price of iron ore has plummeted, while the price of coal, natural gas, and oil have all greatly risen due to economic recovery and resurgent demand for cheap energy. The Australian thermal coal price has gone up from about $64 a tonne in January 2021 to $237 in October, a record in Australian dollars. So much for the coal industry being finished due to market forces!

The reality is that ,like it or not, (currently unfashionable) fossil fuels are our biggest export earner, and are currently growing (not declining) in importance despite state governments delaying key projects. Even in 2019-20, when you add in Australia's crude petroleum exports (1.8% by value of our exports) to coal (11.5%) and natural gas (10%), our total fossil fuel exports (23.3% by value) exceeded iron ore, and the gap will be much bigger in 2021-22.).

The Australian coal industry paid over $5.2 billion in royalties in 2019-20, including $3.5 billion in Queensland and $1.6 billion in NSW. Coal supplied 68.6 per cent of electricity to the National Electricity Market in 2019, gas 9.1 per cent, hydro 6.7 per cent and other renewable energy (wind, solar farms and solar PV) 15.9 per cent.

Everywhere across the Western world, where wind and solar energy has been promoted at the expense of fossil fuels, economic and production problems have resulted. The same scenario is playing out here.

It seems insane that it is economic for Asian counties to ship our coal halfway around the world to benefit from its cheap energy, while Australia (which can build high efficiency low emissions coal-fired generators right on its coalfields) turns its back on potentially some of the world's cheapest electricity. Even sillier is our policy of wanting reduced CO2 emissions, while ruling out nuclear energy. The context of all this is that Australia is responsible for only a small proportion of World CO2 emissions (1.4 per centin 2017). (Accounting for fossil fuel exports, lifts Australia's global carbon footprint from domestic use and export of fossil fuels to about 5 per cent.)

According to economist Alan Moran, Australian taxpayers are spending approximately $13 billion annually or around $1300 per household trying to get rid of coal and interject renewable energy into the electricity market. These policies cause a net loss of jobs in the economy, with every green subsidised job created causing 2.2 jobs to be lost elsewhere. Green energy policies are also destabilising the electricity grid.

Recent spending promises have included Scott Morrison's announcement of $178 million in new funding for a future fuels fund, while Matt Kean announced an additional $105 million to boost uptake of electric vehicles among fleet operators in NSW. The latter comes on top of$490 millionthe NSW government has already committedto drive uptake of EVs.

A number of critics, notably Professor Bjorn Lomborg, have argued that the apparent mild support Net Zero gets from most people in Western democracies will collapse when its practical consequences (expensive less reliable energy) are increasingly felt.

The gulf between politicians and citizens is most apparent in France. This is because the "yellow vest" protest movement has already taken to the streets to push back against the French government's fuel price surcharges, which disproportionately hit car-dependent people in rural areas.

So where is Australia heading?

In my view Scott Morrison is increasingly showing his "moderate" credentials (a "church-going Malcolm Turnbull"?). I believe that enough of the Coalition's conservative base has already turned against the Government, that Labor will comfortably win the next election.

It is possible that the Coalition has adopted Net Zero by 2050 in the anticipation that the policy will collapse well before then, thus avoiding more aggressive cuts before 2030. On balance, however, I doubt that such considerations were more important than appeasing the mob at Glasgow.

Australians can therefore expect a "full-on" switch to so called "renewables" for five or six years. This will lead to still higher power prices and the spread of peak-demand blackouts from South Australia and Victoria to the other states and territories. The whole policy will eventually be discredited, but by then huge amounts of money will have been wasted.

Net zero amounts to a commitment to kill Australia's "golden goose". Be alarmed. Be very alarmed.

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About the Author

Brendan O’Reilly is a retired commonwealth public servant with a background in economics and accounting. He is currently pursuing private business interests.

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