In case the acronym hasn’t stuck yet, CEF means Clean Energy Future. If I’d said “carbon tax”, no problems.
In my 2009 submission to the Senate Select Committee on Climate Policy I ripped into the Rudd Government for commissioning Ross Garnaut
to analyse two specific stabilisation goals: one at which greenhouse gases are stabilised at 550 ppm CO2-e (strong global mitigation) and one at which they are stabilised at 450 ppm CO2-e (ambitious global mitigation).
I then castigated Garnaut for accepting the brief:
This is sad and actually outrageous. Garnaut, had he acted responsibly at this point, would have gone back to those who commissioned the report and asked for the reference to be changed so that he could develop a strategy for a safe climate.
When the 2050 target was changed from a 60% reduction in emissions relative to 2000 to 80% I wondered whether the assumptions about the science had changed. If you go to the Treasury Report on modelling a carbon price it becomes clear that nothing has changed.
Treasury modelled two scenarios, one called “medium” and the other “ambitious”. The medium scenario is then called “core”. If adopted worldwide, it aims to stabilise greenhouse gas concentration levels at 550 parts per million. The ambitious scenario aims at 450ppm.
Treasury then blithely tell us that 450ppm will give us a 50:50 chance of keeping the average global temperature at less than 2C above pre-industrial levels, while 550ppm raises that figure to 3C. Stabilisation at 2C, they say, is the threshold for “dangerous” climate change. They then calmly tell us the likely implications of a 3C rise:
20 to 30 per cent of all species are projected to face a 50 per cent likelihood of extinction under this scenario (IPCC, 2007b), involving total realignment of ecosystems across Australia. Coastal communities, agriculture and infrastructure would all face significant risks, including frequent or permanent coastal inundation for parts of the Australian coastline, a substantial increase in extreme weather across the nation, and substantial restructuring of the rural sector (Pearman, 2008). (p41)
Martin Nicholson notes that the figures Gillard cites are actually from the core scenario. This seems to be true for the Government generally. So that’s what our ‘clean energy future’ officially looks like, folks.
My impression is that the CEF is calibrated to mesh with the global mitigation effort. We are not out in front, we’ve fallen into line and will do what we assess as our share. Certainly Treasury’s approach takes no account of the climate budget approach, where high per capita emitters would be called upon to make a larger effort in the near future.
Accessing international markets is a key feature of the scheme, as can be seen from this graph:
So we are banking on the restraint of developing countries rather than achieving cuts by our own direct efforts.
Lest you think mitigation is a waste of time, the report tells us that we will have 1500ppm of CO2 by 2100 and a temperature rise of 7C under a do-nothing scenario.
Nicholson’s piece is pushing nuclear, but he does make the point that the Treasury modelling of future energy sources includes technologies which are as yet unproven. Here is the relevant graph:
To spell out the percentages, we’ll have 7.9% black coal, 0.1% brown coal, 15.1% coal CCS, 21.9% gas and oil, 14% gas CCS and 41.1% renewables, which are further subdivided into 4.5% hydro, 13,7% wind, 3.2% solar, 1.9% biomass and 17.8% geothermal. That’s just on 47% from unproven technologies. CCS is assumed to be available from 2021.
The particular mix of renewables is not so much a worry, I think, as the reliance on CCS, which seems brave, to say the least.
It is assumed that the carbon price will rise to US$100 under the core policy, and to US$200 if we are ambitious. Curiously the 2050 target remains at 80% for both scenarios. In that case we’ll have 50.7% renewables, with 21.1% geothermal, 5.6% coal CCS and 25.5% gas and oil CCS.
Tapping into international markets is said to be a way of lessening the cost of mitigation. It also synchronises our effort with that of the rest of the world. The underlying strategy is that we will proceed as the world proceeds.
In my senate submission I spelt out at some length why stabilising at 450 or 550 ppm was inadequate. Here I’ll just mention two reasons. (Warning: scary stuff coming up.)
One is that the midpoint temperatures represent short term feedbacks only, and as conceived in the literature carry unacceptable risk on the upside. I repost here the graph from the Stern Review (2006):
The solid horizontal lines indicate the 5% to 95% range based on the IPCC 2001 report and a 2004 Hadley ensemble study. The dashed lines represent the 5% to 95% range based on 11 “recent” studies (Meinshausen, M. 2006). You’ll notice that at 450ppm and above the 95% values are off the page on the upside, meaning that even for 450ppm there is a better than 1 in 20 chance of a 6°C outcome.
That’s not just dangerous, it’s catastrophic.
We need to remember that the above is based on calculated on short term feedbacks. A recent paper by Hansen, Sato and Kharecha (see pp10-17) outline what they think happens when you take slow feedbacks into account. You need to define exactly which feedbacks are included, but the temperature implications are significantly higher.
We also need to bear in mind the possibility of dangerous tipping points, now thought by some as an issue below 2C.
The important point is that we appear to be committing the planet to a very dangerous future, especially in the second half of this century. We are not shooting for a safe climate.
The second is our commitment to sea level rise. Hansen et al remind us that the ice sheets began to form 34 million years ago, when CO2 levels were about 450 to 500ppm. In warming from where we are now you probably need to reckon on an average of 15 metres for every degree temperature rise – eventually. This is what Australia would look like when the ice is gone, from a talk given by David Spratt at the Climate Action Summit, 31 January, 2009:
Sorry, couldn’t resist!
The CEF is a better-than-nothing start which aligns us with the level of ambition of those countries taking action or making pledges on climate change mitigation. Unfortunately when seen against the real problem it remains a half-hearted and anaemic attempt.
19 thoughts on “Assumptions underlying the CEF package”
The good news (for my descendants) is that even at 80m sea level rise, the doomstead will still be on dry land, and not even beachfront. Of course, whether or not it will be possible to grow anything on it is another matter entirely.
Brian: On 2007 figures for per capita emissions from the burning and flaring of fossil fuels an 80% reduction in Australia’s per capita emissions would bring us down to about the current world average. After allowing for projected world population increases, Australia would have to reduce per capita emissions by about 95% to reach the world target of 50% total emissions reduction. I am sure that you would want to argue that this is still far too low – so the future is challenging.
However, 2050 targets are a diversion. It is anybodies guess what the science will be saying by then, how the world will be reacting to the science and what clean technologies will be available by then. As I have said before, what is important is how much we emit over the next 40 yrs.
What we really need to talk about now is what we need to do in the next 5 years instead of trying to make decisions that rightly belong to future elections.
I’d be interested to see what the Treasury assumptions are about the rest of the World’s emissions.
The current situation is that 92% of the World’s population representing 85% of global emissions are doing four fifths of bugger all about trying to reduce and are actually hell bent on increasing them at an increasing rate.
We are pissing into the wind.
What we appear to be committed to still is “life, Brian, but not as we know it”.
OBR Chapter 3 is on global climate mitigation:
John D, any capitalist contemplating building a power station has to take a 40 year view. They are entitled to know where we think we are heading over that period.
Any company, properly advised, would be able to see that the world and consequently Australia has to lift its level of ambition.
Other than that I do agree that the next 5 years are important, as is what we emit over the next 40 years. I don’t think Treasury showed sufficient concern about that last point.
DI (nr) @ 1, Right here we are about 80m above sea level in Brisbane, 7km from the GPO. So the beach would come to us. To be fair that might take a millennium or three.
On a lighter note, the exposure draft of the Clean Energy Bill 2011 is the first piece of legislation I’ve ever come across which has the word “bogus” in it.
Brian: Investors in power stations may hope that they will operate for the next 40 years. But that doesn’t mean that they cannot evaluate an investment where they know that plant may not be allowed to run for the extent of its natural life. The other important point here is that the present worth of income streams 40 years into the future is negligible.
I have argued before that we need a gas transition to give us the back-up power required to give a reliable power supply when a technology such as wind is a major component of the power supply. At a discount rate of 15% the present worth of one dollar per year for 40 yrs is only 9.7% higher than it is for 15 yrs. (15% was a common figure used for reliable investments.)
Investors would be quite happy to bid for the supply of CCGT power for 10 or 15 yrs as long as they knew that this was the restriction on effective plant life.
@5 – ooooh – pledges. That would be like the Kyoto pledges?
I have some land with water views in Fremntle if you are interested.
OBR, the pledges made at Cancun were in fact different, because voluntary.
John D, I would still think that under a market-based carbon price scheme, the price in the out years is important. Power developers should find it helpful to see where Treasury thinks the price will go.
They can also evaluate the effectiveness of the scheme. In this case they should be able to see that a target of 450ppm where the price is estimated to go to $200 per tonne is still inadequate.
Surely the prospective price escalation path is more important than the starting price, or am I missing something?
So we are banking on the restraint of developing countries rather than achieving cuts by our own direct efforts.
that’s not a totally fair characterisation. it would be more like “we are paying developing countries reasonable sums of money to restrain emissions. Our efforts in making that money to give to them is our effort (what with money being fungible and all that).
Fair point, wilful. 🙂
“…the amount of domestic greenhouse gas emissions cut by the Government’s carbon price package could be double that predicted by Treasury.” http://www.apo.org.au/research/low-carbon-growth-plan-australia-0
Brian: There are numerous ways of setting up long term contracts for supply depending on things like who builds, who owns, who operates and whether ownership transfers to the government after a certain amount of time. If we are talking about contracts based on the operator owning the generation plant investor confidence will be maximized if the contract includes an agreed price fixing formula or process that lasts for long enough for investment to be justified. Building a generation plant on the basis of the initial price would be a very brave thing to do.
It is particularly difficult to predict permit prices for emission trading schemes. This is because permit prices are sensitive to the investment decisions others are making. If power requirements are over estimated, permit prices will drop as a consequence of the oversupply of clean power. The opposite will happen if requirements are underestimated.
You only have to look at how MRET, CER and EU permit prices have fluctuated over the last few years to understand why investors will be wary.
Lefty E, thanks, interesting.
John D, I’m assuming that Treasury assumes an open privatised power generation market where capitalists can build power stations as the spirit and the profit motive moves them.
I’m assuming also that the Climate Change Authority will recommend caps as we go that see a rising price in carbon. Setting caps three years out would seem to be the main market intervention in the scheme.
I’m not saying this is the best way of getting the maximum reductions in emissions. I’m merely trying to understand how Treasury and the Multi-Party Climate Committee see the whole thing working.
Brian: I assume that you are right when you say capitalists can build what ever power stations they like. However, there is nothing about cap based systems that offers any real guarantee that the capitalists will be able to sell their power at a high enough price to justify the investment.
There is also no guarantee that enough investment will be made to cover future needs.
Contracts to supply give far more control over the rate of capcity increase.
John D, if no capitalist is inspired to build generating power under the scheme then obviously we have a problem, which will of course be blamed on the government.
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