May 28, 2013

Future Leaders

Green Army: Communications


Challenges to Australian Agriculture


Lauren Rickards and Karlie Tucker

{Australia’s river systems [already] have the lowest and most variable streamflow of any continent.}

For dryland farms (those reliant only on local rainfall) [rainfall] events will … become more intense but less frequent …
[Precipitation] will be less reliable, and the rain that does fall will be less useful for plant growth.

For irrigated farms [any] reduction in rainfall leads to a proportionately greater reduction in streamflow (water flowing into storages).
[In] the Murray-Darling Basin … a 10% drop in rainfall leads to a 35% drop in streamflow. …
[The] Murray-Darling Basin … produces 40% of Australia’s agricultural produce …
[Agricultural output] is projected to fall by 12% by 2030 and by up to 92% by 2100, if adequate mitigation measures are not undertaken. …


If Not Now, When?


Peter Christoff

Since 1990, Australia’s domestic and industrial greenhouse emissions have increased, on balance, by some 4.2%.
Its underlying emissions have increased by 28.8%.
Most of this change is associated with the unchecked development of coal-fired and gas-fired power stations to produce electricity (+47% in emissions since 1990) and increased transport use (+27%).
It is only because emissions from land clearing have been halved … that Australia has managed to offset this underlying increase and approach its Kyoto Protocol-determined target of 108% above 1990 levels.

As a result, Australia has the world’s highest level of emissions per person …

(Climate Change: On For Young and Old, 2009)


Contents


Emissions Trading: Theory and Practice

If Not Now, When?

Challenges for Australian Agriculture

Australian Government Action in the 1980s


FUTURE LEADERS

  • Climate Change On for Young & Old, April 2009.
    Helen Sykes: Editor.

    POPULATION


    Ian Lowe: Emeritus Professor of Science, Technology and Society, Griffith University


    IF NOT NOW, THEN WHEN?


    Peter Christoff: Coordinator of Environmental Studies, Melbourne School of Land and Environment, University of Melbourne

    Australia’s Mitigation Challenge


    Renewables contributed 10.2% of Australia’s electricity output in 1990 …
    [By] 2006 this contribution had declined to … 7.7%.


    Australia’s Regional Challenge


    Extremely poor countries such as East Timor don’t have the resources to buffer their communities against the impacts of global warming on their food and water supplies, on their coastal settlements, through the spread of new diseases and via the impact of extreme weather events. …

    Australia — far wealthier in per capita terms, than any of its neighbours — has the capacity, the responsibility, and the reasons, to help our neighbours in numerous ways. …
    Indonesia is probably the planet’s third greatest source of greenhouse emissions if its legal and illegal land clearing is taken into account.
    Material aid from Australia would help effect very substantial regional mitigation while transferring wealth to those that deserve it.
    We also know that global warming has the potential to cause great trauma and disruption and create insecurity among desperate populations.
    We have the technical know-how and the material wealth to assist near neighbours with adaptation measures that will lessen climate impacts and enhance our collective security.


    If Not Now When?


    [The] Rudd Government is currently proposing an unconditional national emissions target for Australia of –5% below 1990 levels by 2020.
    [It] is prepared to extend this to −15% in the face of an international agreement that commits developed and developing countries to a goal of 450 ppm.
    Labor also supports a national emissions reduction target of –60% by 2050.

    These targets — if adopted internationally — would lead to atmospheric concentrations of greenhouse gases that would almost certainly lead to warming of over 3 degrees by the end of this century, and much higher in the longer term.
    The outcomes would be … devastating for Australia. ..

    Any suggestion that we can delay pursuing tougher and more meaningful targets until other countries agree to comparable measures [is] not ‘in the national interest’. …
    • First, to delay seems to suggest either that we believe
      • that we won’t have to engage in deep cuts at some later stage, or
      • that it will benefit us economically to do so. …
      As Garnaut and Stern have indicated, any delay, while still eventually intending to meet substantial targets, merely defers and intensifies the effort and increases the cost …
    • Second, the real reason for reducing emissions is not merely to reach a lower emissions target at a later date, but to reduce the quantity of emissions being emitted.
      Early, deep cuts reduce the quantity of emissions. …
      Delaying the cuts means a greater volume of emissions will be released, with predictable enduring consequences.
    • Third, by showing international leadership, Australia indicates that it is prepared to take on its fair share, its burden of responsibility. …

    The science makes it clear that the target band-width suggested by the IPCC in 2007, of 25-40% by 2020, is now far too conservative …
    [We must] halve our emissions by 2020 — adopting a national target that is greater than 40% below 1990 levels …
    [Such] a goal will create a dynamic in technological and social innovation that enables us to go further still.
    The ultimate goal … should be at least net zero emissions by 2050 …

    Flip a coin.
    [At] 450 ppm, it’s heads we drive the planet to the point where warming begins to run away from us, tails we don’t.


    CHALLENGES FOR AUSTRALIAN AGRICULTURE


    Lauren Rickards: Associate Partner, RMCG; Honorary Fellow, University of Melbourne
    Karlie Tucker: Senior Consultant, RMCG


    Food Security, Food Miles and Feeding the Planet


    [By 2050 the] domestic food needs … of
    • Asia and Latin America [are expected] to double,
    • those in West Asia and the Arab world to increase threefold, and
    • those of sub-Saharan Africa to increase five- to sevenfold. …

    [Meat] consumption is increasing rapidly.
    [And] 11 plant-derived calories [are] required to produce one calorie of beef …


    Sensitivity to Climate Change


    With temperatures across the country projected to rise by around 1ºC on average, annual rainfall projected to decline by between 2% and 5%, and droughts and heatwaves to increase, productivity on many Australian farms will fall, in some cases drastically. …
    [In the short term] fewer frosts and more carbon dioxide (a fuel for plant photosynthesis) may temper the impact on productivity somewhat …
    [In the longer term, however,] it is going to be extremely difficult to maintain .. our agricultural productivity. …

    [Many] rural communities are set to be more severely affected by climate change than their urban counterparts. …


    Greenhouse Gas Emission Contribution


    At the household level, approximately 28% of our greenhouse-gas emissions and half our water use stems from the production, storage and transportation of the food we consume.

    At the national scale, agriculture is Australia’s second-largest emitter, accounting for around 16% of Australia’s greenhouse-gas emissions, and exceeded only by stationary energy. …
    {[The] largest contribution … comes from manure management and digestion in sheep and cattle (approximately 70% of Australian agricultural emissions and 11% of net national emissions).
    It is livestock emissions that make Australia the third- largest agricultural emissions per capita country in the world.}
    [Other emission sources include:]
    • methane from rice fields …
    • nitrogen fertiliser,
    • burning of savannas and crop residues and …
    • land clearing.

    Potential Contribution to Mitigation


    Methane from animal digestion [can potentially be] reduced through practices such as vaccinations and chemical inhibitors. …
    Increasing the amount of carbon sequestered in the soil is possible through changes to tillage practice and vegetation cover. …
    It may also be possible to reduce nitrous-oxide emissions from fertiliser use by up to 80% through fertiliser management, soil and water management, and fertiliser additives.
    Like soil conservation, these measures may be able to achieve a net return for the farmer, although much more research is needed. …

    [Other] forms of biosequestration, such as long-term forestry and environmental plantings [could] achieve an annual rate of carbon sequestration of 143 Mt CO2-e per year. …

    Unlike the other big emitters in Australia … agriculture is not being asked to pay for many of its emissions immediately …
    [However a] $40 per tonne price on emissions would see a rise in production costs for livestock of 3% and for cropping of 4.5%. …
    [And if] the difficulties of including agriculture in an emissions trading scheme can be overcome, the sector may then also face direct costs for its emissions …
    This would see a rise in production costs of 18% for livestock and 6% for cropping …

    [Mitigation] of agricultural emissions is not only essential for agriculture, but for our national and global effort to reduce climate change.


    CAN EMISSIONS TRADING SAVE THE PLANET?


    Richard Denniss: Economist, Executive Director of The Australia Institute.

    Reducing Greenhouse-Gas Emissions


    When it comes to tackling climate change [there are four policy options: …]
    • regulation …
    • a carbon tax
    • an Emissions Trading Scheme (ETS) [or]
    • [a voluntary approach.]

    A Textbook [Emissions Trading Scheme versus the Rudd Government's Carbon Pollution Reduction Scheme]: A Comparison


    [If] the CPRS does not closely resemble [a] textbook ETS [this undermines the government's case] that it is the best policy choice. …
    This section [examines how effectively the elements of a theoretical ETS are implemented in practice in] the proposed CPRS.

    Step 1: Selecting the Target
    Textbook Emissions Trading SchemeCarbon Pollution Reduction Scheme
    The first step is to decide how much pollution is acceptable and to set a commensurate emissions-reduction target.
    An ‘evidence-based’ approach would rely heavily on scientists to determine the level of pollution required to prevent climate change; however, in Australia the Government will be relying on a combination of politicians and economists to ensure that it gets the right ‘balance’ of environmental conservation and economic growth.

    Given the long-lived nature of greenhouse-gas emissions and the need for large-scale investment in new technologies to reduce them, greenhouse-gas emissions targets are usually expressed as ‘trajectories’ over long time periods.
    It is important to understand that although the debate is principally about what Australia’s emissions should be in 2020 and 2050.
    Such ‘point estimates’ are attached to implied trajectories of emissions reductions for the intervening years.
    That is, calls for a 30% reduction in Australia’s emissions by 2020 implies a gradual reduction of emissions between now and 2020, rather than continued inaction until 2019 followed by a very large reduction in 2020.
    Despite overwhelming scientific consensus that Australia needs to reduce its emissions by between 25% and 40% by 2020, the Rudd Government has proposed a mere 5% reduction, rising to 15% if other countries are deemed to have ‘done their bit’.

    It is interesting to consider the role of evidence in the selection of such a modest target.
    The single reason to tackle climate change is because climate scientists have persuaded policy-makers that action is essential.
    It seems illogical, therefore, to ignore those same scientists when selecting an emissions-reduction target.
    It is often suggested that business groups want ‘certainty’ when it comes to climate change, so it is interesting that the Rudd Government has received no criticism from the large polluters for not providing certainty in relation to the actual annual emissions targets for each year between 2010 and 2020.

    This failure to provide precise annual emissions targets exposes both the annual targets and the ultimate 2020 target to the lobbying of the large polluters.
    It seems that big polluters are comfortable with uncertainty about the level of targets as long [they have the opportunity to weaken them as much as possible.]

    The Government has relied heavily on the argument that Australia’s emissions reductions will be more ambitious on a per capita basis, but such an argument contains a number of flaws.

    1. From the point of view of the atmosphere, it is the absolute level of emissions that is important, not the per capita level.

    2. The Australian Government has more control over population growth than most due to the country’s growing reliance on the importation of skilled labour.
      It is hard to see how the Government can argue that population growth is somehow beyond its control.

    3. Australia’s per capita emissions are among the highest in the world.

    4. If China had not previously undertaken substantial population control, their emissions would be substantially larger than they are at present.

    While the Australian Government urges special treatment due to Australia’s strong population growth, it has not suggested that China should be awarded special treatment for the population-reduction efforts the Chinese have already made.
    Step 2: Converting the Target Into Permits
    Step 2 [divides] the acceptable level of pollution into a fixed number of permits.
    For example, if the Government wanted to restrict Australia’s emissions to one million tonnes per year, it would print one million permits, each of which would allow its owner to emit one tonne of pollution over that year.

    The main advantage of emissions trading is that the creation of tradeable permits to pollute will provide firms with a financial incentive to reduce their pollution.
    If they can find a way to emit one tonne less pollution, they can either sell one of their permits or buy one fewer.
    Either way, they can save money on permits if they can think up ways to reduce pollution.
    [This is the mechanism by which an ETS delivers] ‘least cost abatement’ [— provided] it is operating correctly.
    [The capacity for an ETS to deliver] ‘least cost abatement’ [depends] on the mechanism that allows polluters to purchase permits from each other.
    However, in the Australian CPRS, some sectors of the economy will be ‘covered’ while others, including agriculture, will remain ‘uncovered’.
    This will require the subset of ‘covered’ Australian producers to meet the Government’s 5% emissions-reduction target.

    Agricultural producers will not be obliged to reduce emissions.
    They will not have to measure their emissions, purchase or remit permits, or pay any penalties if their emissions increase.
    There are a number of good reasons to exclude agriculture from the CPRS, most significantly the impossibility of measuring the emissions from 130,000 small farms.
    [However,] the consequences of leaving agriculture out of the CPRS cannot be overstated …

    [For example, in] a textbook ETS, a firm faced with a permit price of $25 per tonne of emissions would be willing to spend up to $24.99 per tonne either investing in emissions-reduction technology or paying some other organisation to reduce its emissions.
    So a big polluter, required to pay $25 per tonne to emit, would be willing to pay a beef farmer, say, who realises only $5 of profit on every tonne of greenhouse gas generated on the farm, $24.99 to grow less beef, freeing up capacity for the big polluter to pollute more and yielding more profit for the farmer.
    However, under the Australian CPRS such a trade cannot occur because there is no nexus between ‘covered’ and ‘uncovered’ sectors of the economy.
    The existence of ‘uncovered’ sectors means that the CPRS cannot deliver ‘least cost abatement’.

    Furthermore, as discussed below, the decision to oblige only the 1000 largest polluters to purchase permits significantly reduces the capacity to achieve ‘gains from trade’ between large polluters, the household sector and the commercial property sector.
    Step 3: Deciding Who Will Be Responsible for Remitting the Permits


    Step 1: Selecting the Target
    Step 3 is to decide who will be held responsible for the pollution [based on the 'polluter pays' principle.]
    This might seem simple, but consider the following examples.
    • A power station burns 1000 tonnes of coal to generate electricity, which is on-sold to an electricity retailer who then sells it to householders.
      In this scenario, which entity should become responsible for buying the pollution permits?

    • A mining company drills for oil and sells the oil to a petrol refinery, the refined petrol is then sold to a petrol station and, finally, motorists buy the petrol for their cars.
      Which entity in this scenario should have the responsibility for buying the permits?
    In the economics textbook, the ‘final consumer’ is expected to buy the permits, but the Australian CPRS requires only the big ‘upstream’ polluters to do so.
    [The] big polluters [then] simply add the price of the permits on to the price of their electricity and petrol.

    [Requiring] the big polluters, rather than households, to buy permits [has] unintended consequences [in] that efforts by individual households to reduce their carbon footprint will have absolutely no impact on the magnitude of Australia’s emissions.
    Households using less electricity [— through improved energy efficiency or by generating low emissions electricity from rooftop PV or small scale wind — just create a windfall for the power company, freeing up] ‘spare’ permits [that it can] sell to other large polluters. …
    ([This is because,] big polluters will continue to ‘own’ any spare permits that result from emissions reductions — even if those reductions are the result of efficiency gains made by individuals.
    [Nevertheless, it would be] possible to amend the CPRS so that those who invest in energy efficiency receive credit for the ‘spare’ permits they have created. …
    [In effect] the CPRS … not only sets a cap above which emissions cannot rise, it also creates a floor below which they cannot fall.
    Additional measures to reduce emissions in sectors covered by the scheme would not result in an increase in emissions abatement …
    [The] emissions avoided through undertaking an additional measure would result in an equivalent increase in emissions elsewhere.
    (Independent Pricing And Regulatory Tribunal, NSW Electricity Regulator)}

    Under the CPRS, only polluters emitting more than [the equivalent of] 25,000 tonnes of carbon dioxide per year … will be required to purchase and remit permits.
    Thus, the Government will monitor the production of oil refineries and will require them to buy and remit permits instead of individual petrol stations or individual drivers.

    It is estimated that there will be around 1000 polluters emitting more than the threshold 25,000 tonnes of greenhouse gas per year and only those polluters will be required to monitor their emissions, purchase permits and remit them to the government each year.
    Millions of small and medium-sized businesses and 10 million households will not have any direct involvement in emissions trading, although they will experience the indirect effects of the scheme as the 1000 big polluters increase the prices they charge for their products.

    [The advantage of requiring only the large polluters] to buy and remit permits [is that it involves] a lot less paperwork …
    [However,] this ‘administrative simplicity’ [is achieved by sacrificing] ‘allocative efficiency’. …

    [Consider] a mining company that owns a generator at a mine and rents serviced accommodation to 2000 workers in a ‘town’ it owns.
    Provided the capital costs of the investment are less than the cost of permits, the company, under a textbook ETS, would be happy to invest in energy-efficiency measures at the hotel to achieve internal abatement.
    However, under the CPRS, the mining company would not be able to capture directly the ‘spare’ permits resulting from the hotel’s reduced energy use.
    The result of any increase in energy efficiency achieved by entities other than the 1000 large polluters will result in an increase in permits available for ALL large polluters.
    The mining company, which invested in increased energy efficiency at the 2000-room hotel, would secure only a very small percentage of the benefits of its investment.

    The CPRS [denies] the 1000 big polluters … these ‘gains from trade’ …
    [They] cannot trade with the millions of households, small and medium-sized businesses or state and local governments because these entities do not have any permits to sell.
    The major [theoretical] advantage of an ETS is that it [allows those] organisations [that are] able to achieve emissions reductions at least cost [to] do so …
    [But] the design flaws in the CPRS [prevent big polluters] from investing in energy efficiency in an externally owned facility.
    Step 4: Allocating the Permits
    [Permits] are auctioned to the highest bidder.
    [This] is one of the main advantages of an ETS.
    It ensures that producers who value pollution very highly (for example, the airline industry, which cannot significantly reduce pollution without reducing the number of flights) will always be able to purchase a large number of permits.
    On the other hand, polluters who can avoid polluting at low cost (for example, by investing in new technology) will choose to buy new machinery rather than additional permits.
    A textbook ETS relies on the auctioning of pollution permits to ensure that the ‘polluter pays’ principle is observed, but the CPRS gives away the majority of permits, with the biggest polluters receiving 90% of their permits for free and smaller polluters receiving 60% of their permits for free.

    In one of the more unusual elements of the CPRS, the faster a big polluter’s emissions grow, the more free permits it will be entitled to in future years.
    Indeed, the emissions of large polluters are forecast in the Government’s White Paper to grow so rapidly that by 2020 around 45% of all permits will be given away.
    Step 5: Trading the Permits
    If polluters find they have ‘spare’ permits, they are free to sell those permits to other polluters who would like to increase their levels of pollution.
    The buying and selling of permits will determine their price in the same way [as any other commodity market.]

    [The] supply of permits is determined solely by the desire to achieve a given reduction in pollution.
    The demand for permits is determined by the willingness of firms to either pay for permits, thereby increasing demand, or invest in ‘abatement’ technologies, thereby freeing up permits and causing, perhaps, a glut in the market.
    These forces of supply and demand are responsible for setting the permit price.

    It is important to point out that … it is the [emissions] target that largely determines the permit price, not the permit price that determines the target.
    Given that the whole point of an ETS is to achieve a safe reduction in the level of emissions, it would be self-defeating to change the target in response to concerns about the price.
    Under the CPRS, however, the price of permits will be capped at $40 per tonne, so if the demand for permits is sufficiently strong, the Commonwealth Government will intervene in the market to ensure that the price does not rise above $40.

    This decision, while providing businesses with the ‘certainty’ they suggest they need, means that rather than having a ‘market-based’ ETS, in which market forces set the price, Australia will have a government-managed CPRS, in which polluters will benefit if the market price is low, but taxpayers [and the environment] will bear the risk if the market price is high.

    The benefits of providing business with ‘certainty’ about the maximum price of permits is acknowledged, but it is important to emphasize that those same businesses operate in an environment in which they have very little idea what the exchange rate, interest rate, inflation rate or unemployment rate will be in five years’ time.
    Nor do they have much certainty about the cost of coal, oil or wages in five years’ time.
    [They manage these risks, at their own expense, through hedging strategies and industrial relations.]
    It is absurd to suggest that big businesses cannot invest unless they have ‘certainty’ about emissions permit prices.
    Step 6: Remitting the Permits
    If a polluting organisation is responsible for producing 1000 tonnes of emissions in a given year, it must hand over 1000 pollution permits at the end of that year.
    The Government will need to construct an entire regulatory system to ensure
    • that emissions from all polluters are measured accurately,
    • that firms are remitting the correct level of permits and
    • that any firms found guilty of either concealing emissions or failing to remit their permits are prosecuted.
    For an ETS to work effectively, it is essential that the cost of noncompliance is significantly higher than the cost of purchasing permits …
    [If they are not, firms may] decide that the [economically] ‘rational’ strategy is to ignore the requirements of the ETS and simply pay any fines if they are caught.
    The process of measuring and reconciling individual emissions with the number of permits remitted by the big polluters will, by necessity, be a complex and expensive task.
    While the exact details of this process are yet to be finalised, it is already apparent that the administrative cost of operating the CPRS is probably not justified by the very small benefit associated with a 5% emissions-reduction target.

    Although a textbook ETS has some theoretical advantages over policy tools such as a carbon tax, it is also much more complex and expensive to administer.
    It could be argued that if Australia were to pursue an ambitious emissions-reduction target of more than 20% by 2020, the administrative cost of an ETS-type scheme might be justified.
    But the large administrative cost of the CPRS, combined with the small 5% emissions target, suggests that the Government is using a bureaucratic sledgehammer to crack a tiny emissions reduction peanut.


    AUSTRALIAN GOVERNMENT ACTION IN THE 1980S


    Joan Staples: Visiting Fellow, Faculty of Law, University of NSW

    • {In 1979 the first World Climate Conference in Geneva had expressed concern over the link between greenhouse gases and climate change.

    • In 1980, the Australian Academy of Science held a conference to review 20 years of measurements showing increasing carbon-dioxide levels …

    • [In] 1985 at Villach in Austria … a UN conference of scientists from 29 countries assessed the growing evidence and released a statement calling for international government action to address the threat.

    • [In 1988] an international conference in Toronto [called] for a 20% reduction of CO2 emissions worldwide by the year 2005, with the brunt of this to be borne by developed countries.}

    • [In] 1989, Environment Minister Graham Richardson took a proposal to Cabinet for a 20% reduction in greenhouse emissions by 2005.
      He was unsuccessful …

    • [In 1991, however, a similar proposal was accepted] on condition it would not affect the economy. …
      [This] proviso about the economy, a lack of commitment by Keating, when Prime Minister, and the outright opposition by the Resource and Economic Ministers meant it was quietly ignored in following years as environment slipped from the public policy agenda. …

    This is not a simple story of Labor governments supporting and introducing climate change measures and the Howard Government resisting them or denying the existence of climate change. …

    The most active time on climate change was undoubtedly from 1987 to 1990 when Graham Richardson was Minister, environment organisations were active, and public interest in everything environmental was very high.
    During that period there was bipartisan agreement from the Liberal Party that the issue was significant and required action — at least this was the policy while Chris Puplick was Shadow Environment Minister.

    After the 1990 election, Ros Kelly became Environment Minister in the Labor Government but, without the unique negotiating skills of Richardson, environment did not have the same prominence. …
    It was also a time of turmoil in the government as the Keating/Hawke leadership struggle dominated and the political fallout from the recession was felt.

    After he became Prime Minister in 1992, Paul Keating actively tried to minimise Commonwealth involvement in environment issues.
    [And when, in 1992, the UN Framework Convention on Climate Change was ratified at the] Rio Earth Summit … Keating chose not to attend.

    From 1996 for over a decade under Howard, government inaction on climate change was the norm. …

    [In 2007, Kevin] Rudd was elected on a promise to take strong action …
    [Yet, his policy to] reduce emissions by 5–15% by 2020 [— while granting] free permits for major polluters and large compensation for industry that [was] not linked to international developments [— was] an incredibly weak position.
    [Especially, when compared to the Cabinet proposal] 20 years ago [to reduce] emissions by 20% of 1988 levels …


    PEOPLE, TREES, LANDSCAPES AND CLIMATE CHANGE


    Greg Moore: Research Associate, University of Melbourne

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