Submission to the Review of Climate Change Policies 2017

Contents:

Preamble
The Key Issue – Existential Risk
The Rapidly Changing Context of Global Climate Change
Practical Implications
The Australian Context
Existential Risk Management
Reframing Australia’s Climate Change & Energy Policies

Author: Ian Dunlop

Ian Dunlop has wide experience in energy resources, infrastructure, and international business, for many years on the international staff of Royal Dutch Shell. He has worked at senior level in oil, gas and coal exploration and production, in scenario and long-term energy planning, competition reform and privatization.

He chaired the Australian Coal Associations in 1987-88. From 1998-2000 he chaired the Australian Greenhouse Office Experts Group on Emissions Trading which developed the first emissions trading system design for Australia. From 1997 to 2001 he was CEO of the Australian Institute of Company Directors. Ian has a particular interest in the interaction of corporate governance, corporate responsibility and sustainability.

An engineer from the University of Cambridge (UK), MA Mechanical Sciences, he is a Fellow of the Australian Institute of Company Directors, the Australasian Institute of Mining and Metallurgy and the Energy Institute (UK), and a Member of the Society of Petroleum Engineers of AIME (USA).

Ian is a member of the Board of the ARC Centre of Excellence for Climate System Science based at UNSW. He is a Director of Australia 21, Deputy Convenor of the Australian Association for the Study of Peak Oil, a Fellow of the Centre for Policy Development, a Member of The Club of Rome and a member of Mikhail Gorbachev’s Climate Change Task Force. He advises and writes extensively on governance, climate change, energy and sustainability. He was a candidate in 2013 and 2014 to join the Board of BHP Billiton on a climate change and energy platform.

Preamble

Thank you for the opportunity to make a submission on Australia’s Climate Change Policies as part of the 2017 Review.

The Review Discussion Paper states that the Australian Government is “committed to addressing climate change —-“ and “is playing its role in global efforts to reduce emissions —-“ with “among the strongest targets of major economies (on a per capita basis) —–“.

Frankly that is a completed misrepresentation of Australia’s position over recent years, and particularly during the tenure of the present government, for the following reasons:

The objective of the December 2015 Paris Climate Agreement is to to hold global average temperature to “well below 2⁰C above pre-industrial levels and to pursue efforts to limit the increase to 1.5⁰C” ^[1]. A realistic assesment of the latest scientific and engineering mechanisms to achieve this objective indicates that, due to global inaction historically, it is now impossible to stay below 1.5^oC, and it will require an extremely rapid, unprecedented technological, economic and societal transformation to have any chance of staying below even 2^o
Australia signed and ratified the Paris Agreement, presumably accepting the necessity of addressing climate change urgently and achieving its objective . However our INDC emission reduction commitments, far from being among the strongest, when viewed in absolute terms are laughable, both in comparison with our peers globally, and in making a fair contribution to the Paris challenge.
Subsequent to Paris, the Federal Government has done its utmost to ensure the Paris objective will never be met by impeding the Australian transformation to a low carbon economy, favouring our traditional fossil fuel industries and discouraging rapid renewable energy innovation on the spurious grounds of “preserving energy security”. Our progress in taking up renewable energy is in spite of government policy, not because of it.
But most damning is the proposed opening up of an entire new coal province in Queensland’s Galilee Basin. This would be initiated with the Adani Carmichael coal mine, the largest ever built in Australia if it proceeds, with another six mines being contemplated. Most of this coal would be exported, but some earmarked for a new power station to underpin the development of Northern Australia.
This is hypocrisy at its worst. The domestic emissions from these coal developments would totally counteract our Paris INDC obligations for a start. But the global implications would be far more damaging, as one or two of these mines alone would ensure the world could never meet the Paris objective.

Only a government which does not believe anthropogenic climate change is a real issue, and has no intention of taking serious action, could have taken such positions. Previous governments of both political persuasions have been guilty of similar hypocrisy, with the result that the policies that do exist today are a dysfunctional and disconnected shambles brought about by years of denial and inaction. They are the cause of our so-called “energy crisis”.

The Review Discussion Paper, as so often with the climate change debate in Australia, defaults to important but essentially secondary sectoral issue. It ignores the threshold policy determinant, and that is the urgency with which we must address climate change.

Time is of the essence. If the world seriously intends to address climate change, then far more urgent action is required than we are seeing thus far, particularly from Australia, who is a notable laggard despite the fact that we are one of the countries most exposed to climate risk.

In reality, it demands emergency action, akin to placing economies on a war-footing. We have left it too late to achieve a smooth transition to a lower-carbon economy. The rationale for this view is set out below:

The Key Issue – Existential Risk

Climate change is about global risk management. Government policy, and the Discussion Paper, fails to recognise that climate risk is an existential risk beyond the conventional risk management experience of corporates, investors, financial markets and regulators. It is an unprecedented challenge to humanity.

The concept of existential risk is not understood or accepted in our political and policy considerations:

It is a risk posing permanent large negative consequences to humanity which can never be undone. One where an adverse outcome would either annihilate intelligent life or permanently and drastically curtail its potential ^[2] ^[3].

Expert opinion considers this is the risk we are now exposed to unless we rapidly reduce global carbon emissions. Our current global emission trajectory would lead to a temperature increase in the 4-5^oC range, a world which would be “incompatible with an organised global community”, with global population dropping from 7 billion to below 1 billion as the impact of climate extremes takes effect ^[4]. The World Bank has pointed out that “There is no certainty adaptation to a 4^oC world is possible” ^[5].

Even the 2.7 – 3.5^oC outcome which would eventuate if current voluntary Paris commitments were implemented, would result in outright social chaos in many parts of the world. The US Military Advisory Board warns against a “failure of imagination” in thinking through these implications of climate change ^[6], which is exactly what is occurring in Australia at present. This is particularly dangerous given our exposure to climate risk.

Existential risk requires fundamentally different risk, and opportunity, management from conventional practice. This should be the over-riding consideration determining the climate change policies which Australia now requires.

The Rapidly Changing Context of Global Climate Change

Any balanced assessment of the climate science and evidence accepts that climate change is driven primarily by human carbon emissions from fossil fuel combustion, agriculture and land clearing, superimposed on natural climate variability, and that it is happening faster and more extensively than previously anticipated.

In this context, scientists have long been concerned about the extreme “tipping point” risks of the climate system; non-linear positive feedbacks which trigger rapid, irreversible and catastrophic change.

These feedbacks are now kicking in. For example, Arctic weather conditions are becoming increasingly unstable as jetstream fluctuations warm the region 20⁰C or more above normal levels; sea ice is at an all-time low with increasing evidence of methane emissions from melting permafrost ^[7]. Greenland and Antarctic ice sheets are melting at worst-case rates ^[8], with the potential for several metre sea level rise this century ^[9]. The Antarctic Larsen ice sheet and Pine Island glacier are showing signs of major breakup as a result of warming Southern Ocean waters, a process which is probably now irreversible [10] ^[11]. Coral reefs around the world, not least the Australian Great Barrier Reef, are dying off as a result of record high sea temperatures ^[12]. Global temperature increases are accelerating, with 2016 being the hottest year on record [13] [14]. Major terrestrial carbon sinks are showing signs of becoming carbon emitters ^[15]. And much more.

The social disruption and economic consequences are already devastating, leading to extensive forced migration and economic collapse in some countries. The refugee crisis engulfing Europe, emanating from Syria and North Africa, is fundamentally climate change driven ^[16] and a precursor of greater conflict ahead. The viability of the Middle East in toto is questionable in the circumstances now developing [17] [18]. Major centres of economic activity, such as the Pearl River Delta, responsible for 40% of China’s exports, the Mekong River Delta and other parts of SE Asia are now under threat from climate-induced sea level rise prior to 2050 [19]. This has profound implications for Australia’s future.

Practical Implications

The Paris Agreement, the successor to the Kyoto Protocol, came into force on 4^th November 2016. It requires the 195 countries participating to hold global average temperature to “well below 2⁰C above pre-industrial levels and to pursue efforts to limit the increase to 1.5⁰C” ^[20]. Regional temperature variations would be far greater than these global averages, rendering many parts of the world uninhabitable even at 2⁰C, beyond the capacity of human physiology to function effectively.

Without rapid carbon emission reductions far greater than Paris commitments, the planet will become ungovernable. Dangerous climate change, which the Paris Agreement and its forerunners seek to avoid, is happening at the 1.2⁰C increase already experienced as extreme weather events, and their economic costs, escalate. The negative impact on human health is already substantial ^[21] ^[22].

It is impossible to stay below the 1.5⁰C Paris aspiration. To have a realistic chance, say 90%, of staying below even 2⁰C, rather than the unrealistic 50-66% chance upon which official analyses are based, means that there is no global carbon budget remaining today. Thus no new fossil fuel projects can be built globally, that existing operations, particularly coal, have to be rapidly replaced with low carbon alternatives, and that carbon sequestration technologies which do not currently exist have to be rapidly deployed at scale ^[23] ^[24]. Even accepting the 50-66% risk levels excludes new projects in toto.

Most dangerously, the climate impact of investments made today do not manifest themselves for decades to come. If we wait for catastrophe to happen, as we are doing, it will be too late to act. However governments, business and investors are complacently allowing the continuation of such investment on the basis that the 2⁰C limit is some way off, with a substantial carbon budget still remaining. Neither proposition is correct and the existential risk implications are being ignored. Indeed, in circumstances of high uncertainty, which is the case currently with tipping points, even greater precautions should be taken than might be the case with better scientific knowledge.

The transition to a low-carbon economy is unprecedented. We have the technology, the expertise, wealth and resources to make it happen. What we lack is the maturity to set aside political ideologies and corporate vested interests to cooperate in the public interest.

And most importantly, time. Any realistic chance of avoiding catastrophic outcomes, requires emergency action to force the pace of change, starting with a serious price on carbon to remove the massive subsidy propping up fossil fuels. The irony is that this transition is the greatest investment opportunity the world has ever seen and Australia has some of the best low-carbon resources to benefit from it.

These views are not irrational alarmism. They may be regarded as extreme relative to mainstream debate within the corporate, financial and investment communities. However they are well-grounded in the science and evidence, as set out in more depth in the “Climate Reality Check” paper referenced [25] and in the increasingly outspoken views of leading scientists [26].

The Australian Context

As the Prime Minister’s speech to the National Press Club on 1^st February 2017 [27] implied, although this was not stated, climate and energy policy must be integrated and treated holistically, not in silos as we have beeen doing.

He emphasised the need for “affordable, reliable and secure energy”, denounced the States for their “unrealistic” renewable targets, encouraged energy storage, but then placed the emphasis back on coal. Priority would be given to “clean coal and carbon capture and storage (CCS) and onshore gas (CSG)”, implying that renewables were neither affordable or reliable. Further “The next incarnation of our energy policy should be technology agnostic – it’s security and cost that matter, not how you deliver it. Policy should be ‘all of the above technologies’ working together to meet the trifecta of secure and affordable power while meeting our substantial emission reduction commitments”.

This approach ignores numerous inconvenient realities.

First, the speech skirted around our biggest risk, namely accelerating climate change. Whilst Australia ratified the Paris Climate Agreement, our emission reduction commitments are not “substantial”. They are laughable both in comparison with our peers globally, and to have any chance of making a fair contribution to the Paris objective..

Second, to have a realistic chance, say 90%, of meeting the Paris objectives, the world should no longer emit any carbon to atmosphere. We still emit record amounts today and need some fossil fuels to build the new low-carbon economy, so that is not going to happen. But emissions must peak and decline rapidly. There is no space for any new fossil fuel projects, coal, oil or gas.

Third, “clean coal” is neither new nor clean. These technologies can reduce emissions by up to 40% relative to conventional practice, but that does not solve our problem when the global carbon budget has already been exhausted. Further, costs are increased by up to 30%, rendering coal even less competitive with renewables.

Fourth, years of research have failed to establish the basis for CCS expansion at scale. CCS works where emissions are stored in depleted oil and gas reservoirs, which the oil industry has practised for decades. Storage in other types of geological structures is far harder. The few commercial operations in the world today are in the former category. The substantial additional costs of CCS again reduce coal’s competitiveness, particularly if you refuse to price carbon, as the government are doing. CCS will be useful at the margin, but it will not save fossil fuels from their inevitable demise.

Fifth, energy prices rose largely because our flawed regulatory framework allowed power companies to invest in unnecessary infrastructure on which they were guaranteed a return. Gas prices rose because the East Coast was opened up to the higher priced international gas market with the construction of export facilities at Gladstone. The unseemly rush into CSG resulted in substantial processing overcapacity, with economic pressure increasing as CSG production was constrained by community objection to the damage caused to arable land and water. Further, high methane leakage rates result in CSG having a greater warming effect than using coal, thereby negating its supposed benefit.

Sixth, there is nothing “agnostic” about choosing energy sources when the fossil fuel industry continues to enjoy a massive subsidy, far greater than renewables, by the lack of carbon pricing. A subsidy the IMF estimate to be around 60% of coal’s market price [28]. And this is the nub of the problem. Our climate and energy policies are a disconnected and dysfunctional shambles, brought about by years of denial and inaction from Federal Governments of both persuasions who do not accept that climate change is happening.

But that game is up. Climate change has moved from the twilight phase of much talk and relatively limited impact. It is now turning nasty. Events are moving faster than expected as irreversible climate tipping points are crossed. The economic and social costs of inaction can no longer be swept under the carpet, with regulators here and overseas demanding action to head off a climate-induced financial crisis.

The only way we can avoid catastrophic climate impact now is to initiate emergency action, akin to a war-footing. That will be accepted before long as impacts bite and low carbon technology undermines the fossil fuel industry

Our antiquated electricity grids are undoubtedly in need of overhaul, but 100% renewable grids are being constructed around the world in only a few years, providing genuine energy security and making traditional concepts of base-load power irrelevant.

As for affordability, energy prices will rise given the extent and speed of change. It is irresponsible to suggest otherwise. However they will rise less with renewables than with coal, with greater prospects of cost reduction as technology improves.

We need a new narrative, built around our potential to prosper as a low-carbon society. We have the world’s best renewable resources, the science, the technology and engineering expertise to seize what is the biggest investment and job-creation opportunity this country has ever seen. Government policy has been preventing that opportunity from being realised.

Existential Risk Management

The risks outlined above require that existential risk should now be the primary consideration in managing climate change and energy policy. That policy should be built around existential risk management unlike anything being contemplated officially at present. The components would encompass:

Normative Goal Setting. “Politically realistic”, incremental change from “business-as-usual” is not tenable. This must be replaced with a normative view of limits which must be adhered to if catastrophic consequences are to be avoided, based on the latest science. Action is then determined by the imperative to stay within the limits, not by incremental, art-of-the-possible, change from business-as-usual.
Change Mindsets, to now regard the climate change challenge as a genuine global emergency, to be addressed with an emergency global response.
Genuine Global Leadership. Current responses reflect the dominance of managerialism – an emphasis on optimising the conventional political and corporate paradigms by incremental change, rather than adopting the fundamentally different normative leadership needed to contend with the potential for catastrophic failure.
Integrated Policy. Climate change, though difficult, is only one of a number of critical, inter-related, issues now confronting the global community, which threaten the sustainability of humanity as we know it. Rather than viewing these issues separately in individual “silos” as at present, integrated policy is essential if realistic solutions are to be implemented. Climate and energy policy needs to fit within a systemic Australian approach to emergency action.

There needs to be an honest articulation of the catastrophic risks and the integrated sustainability challenge we now face, with extensive community education to develop the platform for commitment to the major changes ahead. That has not happened thus far.

Reframing Australia’s Climate Change and Energy Policies

I request that the Review of Climate Change Policies recognises and acts upon the following in developing their final recommendations:

Climate and Energy policy must be integrated and addressed holistically rather than in separate silos as they have been historically
Climate change already poses an existential risk to global economic, financial and societal stability. As such, addressing climate change must become the primary determinant of climate and energy policy
To limit temperature increase within globally agreed objectives, emergency action is now inevitable which must include economic instruments such as sensible carbon pricing, despite being repeatedly ruled out by successive governments.
Emission reduction objectives should be recast accordingly.
Existential risk management techniques are required which fundamentally differ from conventional practice.

All new fossil fuel investment should cease, particularly development of the Adani mine, the Queensland Galilee Basin coal province in general and CSG.

Emphasis must be placed on urgent programmes to transition to genuine low carbon energy sources.

Ian T Dunlop

Sydney

Australia

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References

[1] UNFCCC Paris Agreement Article 2:

https://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf

[2] Existential Risk Prevention as a Global Priority”, Nick Bostrom, Oxford University, February 2013:

http://www.existential-risk.org/concept.pdf

[3] “Global Catastrophic Risks”, Bostrom & Cirkovic, OUP 2008:

http://www.global-catastrophic-risks.com/book.html