CRISPIN HILL: The economics of energy production have finally tipped



CRISPIN HULL: The economics of energy production have finally tipped

By Crispin Hull

Published Monday 7 December 2015

THE Paris climate conference should give us greater cause for optimism about preventing catastrophic climate change than all the talks and conferences before it.

This is not just because so many leaders popped their heads up to commit to reducing emissions.

It is not because so many acknowledged that human action was causing the emissions which in turn were causing the planet to warm.

It is not even that so many agreed action must be taken to reduce the warming.

Rather it is because the Paris conference has provided the best evidence yet that the economics of energy production have finally tipped.

It is now economically smarter, even in the short term, to reduce emissions than to do business as usual.

Political leaders are rarely concerned about the long-term good of their own nations, let alone the whole world. Their own short-term survival comes first and they will usually not do anything to jeopardise that.

So, the fact that they are now willing to pledge long-term targets for the good of the planet is instructive.

It could mean that electorates are now demanding action and that climate change is such a big priority in voters’ minds that unless a politician makes long-term pledges, their short-term survival would be at risk.

But the evidence does not bear this out. Most polling in most countries suggest that the economy, health and education are uppermost in voters’ minds and the climate is well down the list.

The better answer is that it means that the leaders’ pledges in fact amount to next to nothing. They are not giving anything away.

Governments will not need to impose harsh measures to meet targets. Households and businesses will reduce their emissions on their own without either incentives or penalties from government. It has already happened and it is continuing at a faster pace.

Let’s start with the electricity grid. Solar, wind and battery storage are getting cheaper and better. More people are putting solar arrays on their roofs, and soon buying batteries for storage and night consumption will be economic.

The more electricity companies put their prices up to make up for lost custom, the more existing customers will go off-grid. Or conversely, the companies will have to replace coal and gas power stations with what will ultimately be cheaper renewables.

The Energy Networks Association and the CSIRO reported this week that the electricity sector in Australia could cut its greenhouse gas emissions by between 29 and 51 per cent by 2030, and under one scenario, up to 99 per cent by 2050.

Other nations might be able to follow.

With that prospect, small wonder the leaders in Paris could set their targets without difficulty.

Electric vehicles will tap into the same grid. Meanwhile, buildings and appliances are getting ever more efficient.

India is trying to make a case for greater use of coal so it gets its “fair” chance at industrialisation and electrification – just as Europe and the US did the in 19th and 20th centuries.

But it will come to nothing. Faced with the choice on one hand of very cheap solar power with admittedly outages at night or, on the other hand, very expensive poles, wires and coal, the former will look more attractive.

The equity argument that poor nations must be given their chance to develop and pollute will become irrelevant if they can develop just as well without polluting.

It will be the sort of leap-frogging technology that has resulted in many African and Asian countries not have landline telephones, just a mobile network.

Reducing emissions just makes good economic sense.

In China it also makes good political sense. The appalling pollution in major cities – with attendant health problems for their people -- is seen as a sign of poor government. The Chinese Government, therefore, is not giving much away in Paris by promising to do what it must do anyway for its own survival.

The Chinese government, of course, is one of the few that can ultimately control emissions. Others can merely influence them.

No doubt, early incentives and carbon-pricing by governments kick-started a process of emissions reductions, but economics now makes that trend look unstoppable. In a way, what governments pledge is of less importance now. Economics has taken over.

After all, government pledges are not especially enforceable.

An equally important role for government might be to iron out some of the inevitable inequities in the march to a carbon-neutral economy.

Affluent people can afford to buy solar grids, batteries, new electric cars and new efficient appliances. They are investments with tax-free yields for them. Moreover, at present, renters cannot install solar grids and landlords have little incentive to do so.

The market will find it difficult to solve those inequities. It might require government to work out a mechanism to get solar arrays on rental properties (residential and commercial). With that, the Paris targets will be easily surpassed.


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EVERY time there is yet another mass shooting in the US, I am sure many Australians get a supercilious feeling that we could fix that in a jiff. Just get rid of the guns. It is obvious.

Well, Australia has its own similarly destructive phenomenon that people in most other countries would think could be “fixed in a jiff”.

Just get rid of the poker machines. They are not quite as life-destroying as the US’s gun culture, but they are a similar blot on our society.

They are designed to create addiction, and the machines’ owners (and state governments) rely on the addicted for 40 per cent of their poker-machine revenue.

Addicts are not just a few isolated cases. The exploitation of them underpins the whole immoral edifice.

Like the guns in the US, all that is required is political will.