Tony, we need to talk about your gambling problem

Tony, we need to talk about your gambling problem.

Now, yes Tony, we’ve been doing really well out of this bet on fossil fuels in the last few years. China’s sudden switch from net exporter to importer of coal was brilliant. And Japan’s Fukishima nuclear meltdown was a great shot in the arm, too.

What’s that? Yes, I know on a per capita basis we’ve got an awful lot more hydrocarbons under the ground than we could possibly use. And yes, behind iron ore (which by the way has been plummeting in price) it’s our next biggest export. Indeed over the last few years construction of new coal and gas production capacity has been a major contributor to Australia’s economic growth.

But with this construction phase now tapering off, and Australian coal miners now struggling to make a profit, it might be time to think about diversifying the investment portfolio. You know how when you gamble it can sometimes pay off handsomely but, as they say, you also need to know when to cash in your chips and not get too greedy?

You see, your attempt to team up with Canada’s PM, Stephen Harper, to build a coalition of the unwilling on reducing global warming gases doesn’t look like it’s going too well at present.

Overnight UK Prime Minister David Cameron and Chinese Premier Li Keqiang issued a joint communique stating:

The United Kingdom … and … China recognise the threat of dangerous climate change as one of the greatest global challenges we face. The publication of the Fifth Assessment Report of the Intergovernmental Panel on Climate Change confirms that climate change is already happening, much of it as a result of human activity.  The odds of extreme weather events, which threaten lives and property, have increased.  Sea levels are rising, and ice is melting faster than we expected.  The IPCC’s report makes clear that unless we act now the impacts of climate change will worsen in coming decades. In addition, the burning of fossil fuels creates serious air pollution, affecting quality of life for millions. Both sides recognise that climate change and air pollution share many of the same root causes, as well as many of the same solutions. This constitutes an urgent call to action. 

Also, you know how you turned down the UN head Ban Ki-Moon’s personal invitation to attend a world leaders summit on climate change? Well, your conservative mate David Cameron and China’s premier reckon this is a really important meeting apparently. They called it a “key milestone”.

Even if you reckon climate change is crap, it might be worthwhile going along to perhaps broaden your horizons beyond what you hear from your mates at the Institute of Public Affairs.

Now it could all be diplomatic grandstanding, after all coal’s market share of global energy supply is back up at 1970s levels according to BP’s stats.

But this is almost entirely due to China. Apparently the Chinese people are now getting really sick of breathing a toxic brew of chemicals in the haze generated from burning coal. China’s president, Xi Jinping, told his economic officials a few days ago that the country needs an energy revolution. They now plan on reducing their reliance on coal in power generation from a historical level of about 80 per cent to closer to 50 per cent within the decade.

If these guys are serious then have you noticed that the developed world’s demand for coal is on a pretty bad overall downward trajectory? Also, I should let you know that it’s best to ignore some of your mates' claims there is some kind of German coal revival – the actual numbers don’t look good. Japan and Korea are a bright spot but the Japanese PM seems pretty keen on reviving nuclear and they’ve been going gangbusters on solar just recently.

Developed world coal consumption by region

Source: BP (2014) BP’s Statistical Review of World Energy – June 2014

Yep I like the Canadians too, they’re the next best thing to New Zealanders. Although they really need to learn that hockey is supposed to be played without ice skates (isn’t that Ric Charlesworth a genius of a coach – why did Labor ever drop that bloke?).

But have you noticed that all of the major players that drive technological progress around the globe – the United States, Germany, Japan, South Korea and China – have traditionally been net fossil fuel importers?

They seem to be pretty keen on dreaming-up some advanced technologies to reduce their reliance on fossil fuels. Maybe you should have visited Silicon Valley after Houston – those guys are up to some pretty clever stuff in energy too you know.

Don’t get me wrong the Canadians are great, but the other guys in the fossil fuel export club – Russia, Saudi Arabia, Venezuela, etc, don’t look all that flash in comparison. And Norway just refuses to be a team player on denying climate change is a problem.

Don’t you think it might be wise for us to hedge our bets a bit more, Tony?