A new start for climate and energy policy?

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The election of a national Labor government offers a glimmer of hope that Australia can move from pariah to participant in terms of global climate action. But there is no guarantee that our new government will act fast enough or aggressively enough.

Recent reports from the Intergovernmental Panel on Climate Change (IPCC) have stated that humans should no longer develop fossil fuel resources. A more recent study points out that this would still bring us beyond 1.5 degrees of heating. It says that staying within a carbon budget of 1.5 degrees Celsius (with a 50% probability) means leaving nearly 40% of “developed reserves” of fossil fuels unextracted. The International Energy Agency (IEA) has pointed out that allowing existing fossil fuel generation capacity to reach its economic end of life would drive heating to 1.65 degrees Celsius.

It is clear that effective responses will be disruptive, a consequence of decades of ignoring scientific advice. The recent invasion of Ukraine, tragic as it is, provides a demonstration of what such a response might entail. On the one hand, past inaction means that Europeans now face high energy prices. On the other hand, strategies aimed at considerably reducing dependence on fossil fuels are being implemented. They will improve energy security and in many cases reduce energy costs.

Numerous studies (from groups such as the IEA and Climateworks) have shown that there is great potential for reducing negative emissions at low cost. Redirecting subsidies and investments from fossil fuels can help fund change. The economic, social and environmental impacts that result from less climate change – by avoiding or reducing its magnitude – offer enormous benefits.

In its 2021 discussion paper, the Business Council of Australia noted:

  • over the next 50 years, runaway climate change will shrink Australia’s economy by 6% – a loss of $3.4 trillion and more than 880,000 lost jobs
  • Over the next 50 years, taking action on climate change and embracing a net zero economy will grow Australia’s economy by 2.6% – an increase of $680 billion and the creation of over 250,000 jobs

The Business Council of Australia’s support for strong emissions reduction targets and strengthening the industrial emissions safeguard system seems to reflect recognition of these points.

There will be winners and losers. Those who act fast and take risks are likely to be winners. Those who do not act, like recent Australian governments and many Australian businesses, can be sure that they will lose out.

The big question facing Australia now is therefore whether our new government will have the courage or be pressured by ragtag politicians to act fast enough. Moreover, will the Coalition face reality and support strong trade union action? The moderate liberals were ignored and paid Teal’s price for their failure to change governments. The Federal National Party must reposition itself. He has ignored concerns raised by members at state level: for example, last year Victorians debated a motion to disassociate themselves from the federal party over differences over climate policy.

We live in very interesting times. Tough decisions must be made and governments must help affected communities make the transition while reshaping our economy and managing the impacts of global warming.

How Australia Killed Industrial Energy Efficiency Improvements

Australia rate 22n/a out of 25 countries in “industry action” in the American Council for an Energy-Efficient Economy’s (ACEEE) latest international energy efficiency scorecard. Clearly, we need stronger action.

This led me to look at what happened in 2014 when the Abbott government ended Energy Efficiency Opportunities (EEO), the industrial energy efficiency program. I declare a conflict of interest: I was one of the developers of this program and have worked to introduce it to operating industrial sites and real-world businesses. It was widely recognized as the best global political practice at the time. Many companies have achieved multiple benefits, not just energy savings.

EEO’s 2013 independent review, not currently available on the internet, showed it saved more than $300 million per year at a cost of minus $95 per tonne of avoided carbon emissions, after just several years of operation. Climateworks estimated savings at $1.2 billion. The 2013 review recommended that the program continue.

But the Office of Best Practice Regulation’s ideologically driven impact statement assumed that the current program would provide zero future savings. It’s hard to imagine how a program like EEO could deliver nothing after saving hundreds of millions of dollars a year in its first few years of operation.

Ongoing annual compliance costs of $17.7 million spread across approximately 300 large companies with multi-billion dollar budgets outweighed the zero “calculated” benefits of OBPR. He recommended that the program be stopped – in line with the radical right-wing Abbott government and its extreme “economic fundamentalist” ideology.

The decision undermined the implementation of effective industrial energy efficiency policy for nearly a decade, costing industry and Australians billions of dollars and billions of tonnes of emissions, and hampering our ability to be part of a global low-carbon future. Yet it has generated little public debate.

Unfortunately, my recent work on industry energy efficiency programs has shown that most of the lessons from a decade ago have been lost. Most Australian businesses are part of our climate and economic problems, not their solution.

We need aggressive action. Strengthening the industry emissions safeguard system is a small step in the right direction for major emissions-intensive industries. But most Australian businesses are not covered by this scheme. In addition, direct Scope 1 and 2 emissions (from direct energy use and activities they control and purchase electricity) from most companies represent a small proportion of emissions. associated with their activities. As a recent Commonwealth Bank report showed, most corporate climate impacts result from upstream activities (production of inputs) and downstream activities (including operation of products and services) . These scope 3 emissions appear as financial costs embedded in inputs and as operating costs for businesses and households downstream: these are hidden costs, or those that others outside the business pay.

An effective climate policy should require companies to measure and report significant Scope 3 emissions, and work with suppliers and customers to reduce them.

Most companies need help identifying and managing their emissions. This means training, funding and investing in smart, real-time data analytics and flexible equipment. An updated EEO program including funding for concrete actions would be helpful. Public reporting on emissions and actions is also important for strengthening accountability and motivating managers.

Companies also need help identifying the multiple benefits of climate action that are mostly ignored. These include reduced food and material waste, improved process reliability and productivity, better health and safety for personnel, updated products with features loved by consumers, and many more. ‘others. Reports on the benefits of energy efficiency by the IEA, the Australian Energy Productivity Alliance, Climateworks, the Green Building Council and many others document the huge opportunities.

Our energy future in context

Former Prime Minister Malcolm Turnbull argues that we need lots of pumped hydropower storage. Andrew Blakers points out that we have many good sites for pumped hydro. The solar industry is aiming for even cheaper photovoltaic production and the gas industry is pleading for hydrogen to be our saviour.

Each option could play a useful role in Australia’s energy future, but we need to put energy in context. It is a “derived need”. Nobody really wants energy – or technology for that matter – for themselves. They want services they value – comfort, light, food preservation and entertainment – ​​but even the idea of ​​necessary services is unclear. People’s perception of the services they think they need is framed by their past experience, not by what is possible.

Stationary energy (electricity and gas) accounts for only a few percent of Australia’s GDP. The energy industry thinks this is very important, and the fragile energy system we’ve designed means that many people think reliable power is important. But it’s just one of many critical factors needed to maintain our quality of life and productivity.

Our capital investment in energy supply is also only a small proportion of total capital investment, so “rational” energy economists and analysts who focus on energy issues actually apply bounded rationality by ignoring many other important behavioral factors. From a decision maker’s perspective, it is often reasonable to treat energy as a minor issue as long as they can access the services they want.

How many people would rather go back to a situation where they had to drive their car to a video rental store, then rent a DVD and use a specialized video or DVD player to access home entertainment? How many people who bought homes in regional areas would return to cities to access work, now that remote work has evolved throughout the pandemic.

The energy industry is struggling to grasp the implications of changing perceptions of what consumers actually want.

Part of the reason is that consumers often don’t really understand what services they really want or what energy is actually needed to provide them.

It’s an exciting and risky time, as our interpretation of our energy needs evolves and the range of available technologies expands into previously separate sectors. An electric car is a mobile battery. A house can generate and store electricity and interact with the electrical grid. A thermally efficient home may require little or no heating or cooling. A mobile phone transforms our lives.

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