The latest episode of my Economics Explored podcast is on the topic of decarbonising the economy. My monologue is based on a talk I gave last Tuesday to the First Tuesday Club forum hosted by the Brisbane Dialogues group at C’est Bon, Woolloongabba. My role was to give an overview of how decarbonisation will affect Queensland, in the lead up to an event on climate change the Brisbane Dialogues group intends to hold at the Tivoli in late July, assuming we’re not locked down at the time. The Brisbane Dialogues group has recognised that many people, the young in particular, are incredibly worried about climate change, and it has decided that the group, which is comprised of several prominent Brisbane business identities, needs to start a non-partisan, non-ideological discussion on decarbonisation. This is a worthwhile thing to do.
Climate change is certainly a big challenge, although it’s highly unlikely to result in the imminent extinction of humanity as many activists claim. On this point, check out the excellent new book Unsettled: What Climate Science Tells Us, What It Doesn’t, and Why It Matters, by former Obama administration energy policy adviser Steven Koonin. Humanity does need to reduce greenhouse gas emissions, but fortunately we have several decades to do so.
Clearly, the decarbonisation that scientists say needs to occur by 2050 will have a larger impact on Queensland than the rest of Australia, given all our coal mines and our big power hungry aluminium smelter at Boyne Island near Gladstone. That said, there is a large degree of uncertainty over just how aggressively major economies will actually decarbonise and what that will mean for global coal demand (e.g. check out A Study of Long-term Global Coal Demand by Queensland Treasury).
Whatever happens, as I note in my remarks, we really need to be thinking about the future structural changes which may occur in our regional economies and what structural adjustment policies (e.g. retraining, investments in regional infrastructure) may be necessary. On structural adjustment policies, check out Structural Adjustment Policies Becoming Increasingly Important).
Among other issues, in the podcast episode I touch on the need to fix up our electricity market so that we can successfully reduce emissions without compromising reliability. Currently, it’s arguable that we’re integrating intermittent renewable energy capacity too quickly, without sufficient back-up or storage capacity (e.g. grid-scale batteries, pumped hydro, etc.).
I also discuss what William Nordhaus’s Integrated Assessment Models of climate change, which he won the Nobel Prize in Economics for, tell us about climate change policy responses – i.e. a carbon price which gradually increases over time would be the most cost-effective way to reduce emissions, and it should apply across all sectors and across all economies. Nordhaus’s new book The Spirit of Green is highly recommended reading.
Finally, although the challenge of decarbonisation is huge, there are reasons to be hopeful. Ross Garnaut often writes about the Superpower opportunity Australia has to use abundant sources of renewable energy to power much greater minerals processing than we do currently. And Bill Gates tells amazing stories about all the R&D going into new emissions reduction technologies in his latest book How to Avoid a Climate Disaster. So I’m increasingly confident Queensland and Australia will be able to adjust successfully to a decarbonising world.
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During the pandemic we have seen an economic benefit when Australians spend money at home rather than on overseas travel. We would see an even greater benefit if transport was electrified and we used domestic energy sources rather than spending billions on importing liquid fuels. This would be a huge beneficial structural adjustment which should receive encouragement from the Government.
Thanks Arthur. Yes, electrification of transport and indeed all sectors of the economy is required for decarbonisation. Good point on the structural adjustment implications of this.
Communist China is responsible of around 50% of the world’s coal consumption.
Hi Paul, yes. We need global cooperation to decarbonise that is for sure. There is no point Australia wearing a hair shirt if no one else is. At the moment, the prospects for global cooperation aren’t great obviously. Thanks for the comment.
Carbon dioxide is essential for plant life. No CO2, no plants; no plants no animal life. CO2 is pumped into commercial glasshouses to increase plant growth. More CO2 means plants can also grow in difficult conditions (eg arid Australia). No different to sick patients in hospitals who are given oxygen supplement to help their recovery (except oxygen for animals is what CO2 is for plants). The Covid 19 shutdown of world economies and their CO2 emissions has had no material impact on global CO2 levels or temperature so it is very unlikely that any deliberate attempt to reduce man made CO2 emissions will either. The natural flux of the planet is far greater than anything Man can do. From ice core data, geologically, atmospheric CO2 concentration follows naturally induced temperature change, not the other way around. Warmer oceans expel more dissolved CO2 when global temperatures rise.
Thanks for the comment, Paul. Why do so many scientists say we need to get to net zero emissions later this century then? Are they all wrong?
Most scientist do not say that. Certainly none of my scientific colleagues. In fact most scientists, to my knowledge, disagree with the current climate alarmism. Most will agree that man made carbon dioxide may have a minor, almost imperceptible, impact on global temperature but there is not the evidence that this is material or that it justifies a reduction in the use of hydrocarbons. However all scientists and corporate scientific organisations know that the way to get research funds from government is through a scare campaign. My Canadian Ph.D examiner gave a talk on that at an international scientific conference in Christchurch some years ago. The scientists from first world countries just sat back and listened, those from third world countries took notes; we didn’t, we already knew. Part the problem is the change, over the last few decades, in the funding process for science from tenured staff to 3 year research grants – the purchaser provider model. Except in this instance it is the provider (the scientist/scientific organisation) who is informed, not the purchaser. A self reinforcing iron triangle of scientists, voting public and government in each corner. People, overall, operate in their self interest, Scientists have mortgages too and are generally not stupid. Grant funding for science provides perverse incentives. Reform of the funding model is required for reliable scientific advice.
Thanks Paul. I reject the climate alarmism and mentioned Steven Koonin’s new book in my talk. But I thought a reasonable reading of the evidence would suggest we need to decarbonise eventually (i.e. over the rest of the century, and not immediately as Greta and the Extinction Rebellion would want us to). Let me have a closer look at the evidence so we can discuss further in the future.