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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