Australia: Blinded by Coal Dust?

Last Updated Jul 24, 2011 8:50 AM EDT

Coal is relatively cheap, so we burn it up to make electricity and we sell heaps of it so others can try and match Australia's poor record on greenhouse gases. But what about when other alternatives become more viable --- in a few years' time?
The world would be in a sorry state if everyone behaved the same way Australia does. Along with the US and Canada we lead the world in electricity consumption per capita --- almost twice that, of the UK, for example. If everyone on the planet demanded the same electricity consumption as the average Aussie, world production would quadruple.

As well as being one of the highest users of electricity, we are also the dirtiest. Ninety-three percent of our electricity comes from burning fossil fuels. Canada, which consumes more than us, is at least clean about it; almost 60 percent of their power comes from hydroelectricity. Low down on the list of carbon polluters is France, with three-quarters of their power coming from nuclear energy.

That's why we need to consider carbon trading. If the developing world is to push its consumption up to our levels, we need to ensure they do it using commercially viable renewable energy alternatives. It's far from healthy for us to foist cheap coal on the world and put profit over the health of the planet.

The carbon tax puts an immediate cost on polluters. The biggest electricity generator, state-owned Macquarie Generation, emitted 23 million tonnes of greenhouse gases in 2009 --- at $23 a tonne the half a billion price tag would almost double their costs. If we extrapolate their costs across the industry (their annual report claims they produce 12.67 percent of the national electricity market) the total carbon tax bill for all electricity in a year would be around $4.5 billion --- $200 per man, woman and child. It's a slug of money, which is why we needed a tax concession to help with the transition.

It is just a period of transition, of course. That cost will come down as the electricity generators start using coal less and renewable energies more. A carbon price will make that happen because the price differential for alternative sources is getting narrower all the time. The US Department of Energy estimates wind power, geothermal, biomass, hydro and nuclear will all cost around the same as coal for plants entering service by 2016. They place a higher cost on coal technologies with carbon controls. That would seem to indicate that demand for coal could be short-lived, with or without some sort of emissions trading scheme.

That means, irrespective of the climate change argument, coal might soon have had its day in the sun. And we might have been so blinded by short term profits to see it coming.

Instead, we hear the minerals industry decrying the carbon tax. "It'll cost jobs!" they shout. Sure, it'll cost the jobs that would have existed if the industry had continued to grow, meeting world demand with more polluting energy. But that ignores the scenario, where that growth is increasingly met by competing sources. Those jobs that don't go to the coal industry, will go elsewhere --- like commercialising alternative energy sources.

It could become a classic case of a protected industry failing to adapt. In this case, the protection has been the ability to pollute without paying a fair price for the damage. Alternative sources cost more, but don't pollute as much, so their growth has come despite a competitive disadvantage. Over time they will become more efficient and more viable. All Gillard is doing is bringing that day forward, by making carbon-producing industries account for their real costs. Admittedly polluters overseas will not face the same cost right now, but they too will face competition from other energy sources.

If we can have a big part to play in developing and selling those new technologies, helped by the short-term artificial demand created by a carbon tax, we won't worry who else is producing coal because increasingly we won't need it.

Which is the best legacy for Australia: the polluter who led others the same way, or the stimulus for a sustainable future?

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Read more By The Numbers articles by Phil Dobbie here.