In the press reports surrounding the release of the Energy White Paper there appeared to be two parallel universes in existence – one concerned with dangerous climate change and another concerned with satisfying Asia’s demand for energy.
''We are pleased that it recognises Australia's position as a global energy supplier. Australia's coal is lifting people out of poverty and is an essential input to the nation-building infrastructure in developing economies."
For those deeply concerned about climate change, Nikki Williams probably invokes feelings of disgust and revulsion. But when you look at the IEA forecasts of what it expects to happen in China and India based on present government policies and energy economics, you come to appreciate where she’s coming from.
The present path is that China and India will be gobbling up all the growth in coal, and nearly all the growth in oil. While on renewables they take up just 20 per cent (although it should be noted that the size of the expansion in renewables is greater than coal and oil combined).
The end result is that these two countries alone make up about 75 per cent of the growth in CO2 emissions. This is all illustrated in the IEA chart below and you can see why there are a number of people who can’t imagine that we could address climate change without widespread use of carbon capture and storage technology.
The difficult thing in all of this is it’s pretty hard to demonise these guys for increasing their consumption of energy. Over a third of Indians don’t even have access to electricity. While we complain about our iPhone (or Android phone– I can’t bring myself to give in) running out of battery for an hour, a third of them don’t even have a refrigerator. In China the number of passenger cars per 1000 people is 34, for Australia it’s 550. Per capita, India consumes 571kWh of electricity per annum, China 2,631kWh while for Australia it’s over 11,000kWh. Energy for these countries is not about a plasma screen television, surround-sound theatre and central air-conditioned house, it’s about what we take for granted as fundamental necessities.
This week Martin Ferguson attended an event organised by Business and Climate Spectator on issues surrounding our future energy supply. During the discussion it was readily apparent that Martin Ferguson’s primary concern was securing another wave of resources investment. We’ve already got several hundred billion dollars of investment flowing into construction of coal and gas projects. In the interests of growing Australians’ income and maintaining employment Ferguson is pretty keen that we keep this going.
If you were to suggest that Australia should be constraining fossil fuel exports in the interests of avoiding dangerous climate change I suspect he’d look at you as if you were in cloud cuckoo land. Asia is determined to pull itself out of poverty, it needs energy to do it, and we’ve got plenty of it. We’re going to help people out of poverty and make a tidy quid while doing the world a favour.
But of course what the IEA projects in the above scenario is not pre-ordained from God, nor is it desirable for Indians and Chinese in the long-run, because they’ll suffer some of the greatest damages from climate change.
The chart below, also from the IEA, shows that India and China will increasingly become dependent on energy imports. While the Chinese and the Indians are buying a lot of coal, oil and gas from us, that doesn’t mean they particularly like handing over great wads of cash to us, the Russians and the Saudis.
Net energy self-sufficiency for major energy consumers in New Policies Scenario
China isn’t just getting into wind and solar for the export opportunities it offers, they also want to lesser their dependence on countries like us for the key lubricant of their economy.
In addition these countries have got caught providing subsidies for fossil fuels that ultimately just lead to Indian and Chinese taxpayers underwriting Australian and Saudi lifestyles. The Indians for example give electricity away for free, yet regularly find themselves suffering shortages of supply and regular black-outs. The Chinese provinces underwrite aluminium smelters when they could import the stuff for far less and also don’t have enough electricity to go round. These subsidies are completely bonkers.
Top 25 Countries by value of fossil fuel consumption subsidies - 2011
It’s one thing for the Saudis and Russians to subsidise energy when they’ve got huge amounts of it. Yet I suspect that India and China will wise up to the stupidity of these subsidies as they consider a potential energy import bill in 2035 of $US700 billion per annum in the case of China and $US400 billion for India. Both countries have huge room for greater energy efficiency that would be cost-effective to implement. Also India’s energy consumption infrastructure is largely yet to be built so hopefully they won’t repeat our mistakes.
If there’s one thing we can learn from the history of energy forecasting it’s that we usually end up blindsided for how quickly things can change.
At present Nikki Williams and Martin Ferguson’s universe holds sway. But who knows, maybe Ross Garnaut could be proved right about thermal coal being in "deep shit”, with India and China pulling themselves out of poverty without enriching us by quite as much as we might like.