Net-zero challenge needs both a tech and political fix

David Havyatt

The Net Zero Australia study announced by Melbourne University fills one of the missing links in Australian emissions reduction and energy policy. Despite Prime Minister Scott Morrison’s false dichotomy between technology or taxation, getting to net-zero requires the right politics not just the right technology.

In a world where ‘productivity’ and ‘innovation’ are words that are used with a near religious reverence, where every known social or economic challenge is seemingly solved by one or the other, it is sometimes hard to remember that politics counts.

Prime Minister Scott Morrison told us at the National Press Club in January 2020 that ‘our climate action agenda is a practical one, it goes beyond targets and summits and it’s driven by technology, not taxation.’

For good measure he told us again in Q&A at the NPC in February this year, saying that when it comes to emissions ‘Australia’s approach will be technology driven, not taxes driven, not higher electricity prices, not an electricity tax.’

green parliament
Challenge: The technology and political foundations of a net-zero Australia

In the speech itself he stated: ‘Our goal is to reach net zero emissions as soon as possible, and preferably by 2050.’

The fact that he has stated it and repeated many times in between the two speeches and since, doesn’t make it logical. No one who has ever supported putting a price on carbon, which has (courtesy of the Gillard and Abbott show) become permanently equated with a tax, has claimed that we have all the technology we need for transition.

While a price on carbon will help make existing more expensive technology viable by recognising the (external) cost of carbon, the intent includes to create incentives for more technology R&D. That the ‘conservatives’ within the Coalition prefer direct government intervention over a classical economics prescription explains why they shouldn’t erroneously be called the ‘right.’ The latter appellation should be reserved for those who eschew excessive Government intervention.

But not only has Morrison set up a false dichotomy, he has a manifestly insufficient ‘technology roadmap.’ In the Executive Summary to its 2017 Review of Climate Change Policies the Coalition government noted:

The Council of Australian Governments (COAG) has endorsed recommendation 3.1 of the Independent Review into the Future Security of the National Electricity Market (the Finkel Review) to develop a long-term emissions reduction strategy by 2020. This is consistent with the approach adopted by most G20 countries. The Government will develop a strategy in consultation with businesses, the community and state and territory governments.

In section 3.6 of that report headed A long-term climate change strategy, the government made the following commitment:

The Finkel Review recommended that by 2020, the Australian Government should develop a whole-of-economy emissions reduction strategy for 2050 to increase investor confidence. Consistent with the government’s response to the Finkel Review, the government will start developing in 2018 a long-term emissions reduction strategy by 2020.

The government’s Technology Investment Roadmap and First Low Emissions Technology Statement do not constitute such a strategy.

Thankfully, the academic world is filling the void. The Melbourne Energy Institute at the University of Melbourne has announced a two year project Net Zero Australia to ‘analyse how Australia can achieve a net zero economy by 2050.’

The project (tagged NZAu) is a partnership between the Universities of Melbourne and Queensland, the Nous Group and Princeton University. It is based on Princeton’s Net Zero America. The Princeton modelling begins with a selection of scenarios for reduction pathways.

Scenario analysis is incredibly important. Ever since scenario planning was developed by Shell in the early 1970s they have been recognised as an effective planning tool to deal with the fact that the future is uncertain.

How we use and produce energy in 2050 can be subject to a vast array of variables, not least of which is the extent to which we might be able to reindustrialise Australia using access to abundant cheap energy and the development of robotics.

The NZAu study is going to use scenarios and then ‘present the costs and benefits of each scenario.’ This is potentially a misuse of scenarios.

It suggests that scenarios are a pick your own adventure tool, whereas in long-range planning they identify alternative futures the occurrence of which is not entirely within your own control.

The article linked above notes that the Shell scenario approach became famous because in the 1972 scenarios, in an era where recent history was of uninterrupted growth, one was for ‘a disruption in oil supply and a subsequent rise in prices.’ In October 1974 this scenario rapidly materialised with the Arab Oil Embargo following the Yom Kippur War.

While decision makers can’t choose between scenarios, they can choose between policy options that make one scenario more likely than another (for example by investing heavily in RD&D to reduce the cost of a technology) or by making policy choices that are the most robust across all scenarios.

The NZAu announcement says the study ‘will not recommend a preferred pathway or critique current policies.’ This is already in part false, because undertaking the study itself is a critique of the policy making process that hasn’t undertaken the study itself.

Neither the Australian Energy Market Operator’s Integrated System Plan nor the Energy Security Board’s Post 2025 Market Design Study develops scenarios for a net zero future and develops pathways to achieve them.

This then brings us to the core issue. It takes more than technology to obtain a net-zero future, it takes policy. And policy implementation is the ultimate objective of politics. This is the subject of a post by Mark Diesendorf on John Menadue’s Pearls and Irritations.

His starting point is Alan Finkel’s Quarterly Essay Getting to Zero. Finkel has been the government’s right hand man on technology and energy – first in his review of security of the National Electricity Market which recommended a strategy, and secondly as the Chair of the Ministerial Reference Panel developing the technology strategy.

Diesendorf’s first critique is that a ethical/social justice view of Australia’s obligations is that we need to decarbonise more quickly than just a linear reduction to net-zero by 2050.

Whatever the trajectory, he is correct that the choice of the trajectory is a political question. It can and should be informed by advice from experts on the implications of alternative trajectories, but the final choice is political.

As I have discussed recently, Morrison views the political choice primarily through a lens of robust nationalism.

But Diesedorf uses his answer to the social justice question to argue that to do its share of decarbonisation Australia will have to reduce its energy consumption. This is a very long stretch.

There are industries and opportunities which would see Australia increase its energy consumption and doing more to reduce global emissions; steel and lithium being two. Twiggy Forrest is famously developing plans for ‘green steel.’

In their submission to the Technology Roadmap Energy Consumers Australia used the example of the refining of lithium as a case study. A technology roadmap to use renewable energy resources to refine lithium in Australia rather than have the ore mostly go to China to be refined using fossil fuels seems to be a double win. But it wouldn’t be consistent with the thesis that we must reduce energy use.

There are very few challenges that can’t be solved if you can apply enough physical energy. Desalinated water has been described as ‘liquid energy’ and the wind farms beside Lake George were first developed so the New South Wales Government could use carbon free energy to make water.

Unfortunately, the Australian government has an idiotic project which it calls the National Energy Productivity Plan. It is idiotic because it defines energy productivity as GDP divided by national energy consumption and then sets a goal to improve this measure by 40 per cent between 2015 and 2030. There hasn’t been an annual report on progress since 2018 and hopefully the plan is being quietly forgotten.

There isn’t a choice between technology and taxation to get to net zero emissions; technology development is essential. But technology alone is not sufficient. There is still a need for political decision making and that needs to be informed by good analysis of the opportunities.

NZAu will help fill the information gap the Australian Government faces in policy making. That the study wasn’t commissioned by Government reflects the poor quality of policy decision making.

Footnote: Between 2015 and 2020 David Havyatt was Senior Economist at Energy Consumers Australia and wrote the submission referred to in the article. The NZAu project is sponsored, among others, by the Minderoo Foundation whose philanthropy is supported by Tattarang and its portfolio of businesses; Tattarang is one of Australia’s largest private investment groups and is owned by the Forrest family.

Do you know more? Contact James Riley via Email.

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