Written Comment on

"Australia and Climate Change Negotiations - An Issues Paper - DFAT"


Michael Gunter

Trustee, Renewable Energy Development Trust

and owner of the Breamlea Wind Generator

Summary: The flawed UNFCCC process cannot result in a workable outcome. It is imperative that carbon permits/taxes are urgently factored into the global economy so that market forces can steer future investment in the direction of environmentally sustainable long term economic development. No distinction should be drawn between developing and developed countries. Two Victorian examples are given: trading of Green Power from my wind turbine to the customer, and the situation of Alcoa's aluminium smelting in relation to differentiation or carbon permits. A non-exhaustive list of *real* greenhouse challenges is presented.

"Ask a silly question, and you"ll get a silly answer"
The FCCC - Berlin Mandate - Kyoto Instrument process is fatally flawed. It asks the wrong question of the community of world nations: the greenhouse gas (GHG) emission problem is forced into the context of a country-by-country analysis. In this era of trans-national corporations and free trade, of rampant greed and consumption-obsessed lifestyles of millions in the developed world (and more than a few ultra-rich people in the "developing" world), the country-based approach seems doomed to failure. This failure seems almost guaranteed by two related factors: the fact that the developing countries have been deemed not to be able to afford GHG reductions, and the likely response of the world money markets to the Kyoto outcome in shifting dirty industries to developing countries. In the context of this flawed process, any answer will be silly (i.e inappropriate), including Australia's case for differentiation.

Inevitable conclusion from the trading of greenhouse credits: As owner/operator of the Breamlea wind generator, a "windmill" capable of generating 60 kilowatts of electrical power, I sell 100,000 kilowatt-hours per annum of essentially pollution-free electrical energy to CitiPower Pty. I am tempted to think that I can personally credit the GHG saving against the pollution that I and my family create in other areas of our lives, such as flying to Kakadu for a holiday, buying Coke in aluminium cans, or driving around town in one of the two cars we own. But, hang on a minute! my customer is paying top dollar for my electricity, because he too wants to claim the greenhouse benefit for himself. I am thus forced to reflect upon my lifestyle and take yet more measures to reduce my personal impact on GHG emissions: it is a lifestyle problem, not just for me, but for all of us. My customer, CitiPower Pty cannot claim ownership of the greenhouse benefit of my turbine either, as they in turn are selling it as EcoPower to, inter alia, The Body Shop, a cosmetics retailer sufficiently up-front on environmental responsibility to actually put its money where its mouth is. "He who pays the piper, calls the tune". The fact that my customers are so keen to claim the greenhouse benefits of my wind power beautifully illustrates that it is the customer, the whole customer and nothing but the customer who must also accept 100% of the responsibility/cost for the GHG emissions of the commodities that he buys: caveat emptor!

Differentiation insanity: Victorian aluminium smelting:
Lets look at aluminium smelting in Victoria. Alcoa and the Victorian Government are bound by a contract for the long-term supply of cheap electricity for the smelting of alumina at Portland. All other electricity consumers in Victoria support this crazy deal by paying, directly or indirectly, a premium on their electricity bills; through the Portland Smelter Agreements (Part A, Schedule 3, Electricity Industry Act 1993), which, depending on world aluminium prices may cost around $200 million every year. For the "privilege" of this financial outlay, Victorians are to be associated with the production of about 468,000 tonnes of refined aluminium per annum, 90% of which is exported. The association will be particularly strong if the Australian Government's differentiation concept is to be applied at a regional level within Australia, as would seem logical in view of their position with respect to the EU. So under differentiation in the UNFCCC context, Victorians must carry the pollution burden of at least 9,360,000 tonnes every year of CO2 emissions produced in the Latrobe Valley from the generation of the 39,420 Gigawatt-hours of electricity required each year. To this must be added the CO2 equivalent of all the perfluorocarbons emitted from the pot lines at Portland during the smelting process (ask Alcoa, I don't know this figure, but according to NSW EPA at http://www.epa.nsw.gov.au/soe/95/6_2.htm, the PFCs in that state amounts to 1% of CO2 equivalent emissions). In the context of this example, it must be said that differentiation seems a pretty half-baked attempt to sheet home the environmental cost of Victoria's aluminium production to where it really belongs: the consumers of the aluminium.

The Issues Paper Overview blandly states that
"This atypical trade profile has resulted in significant upward pressure on Australia's greenhouse emissions. Emissions associated with Australia's highly greenhouse intensive exports are attributed to (my italics) Australia's sources rather than to the countries consuming these exports."
To whom are we to attribute this attribution? ABARE? The UN, too spineless to take-on the multinationals? It seems entirely arbitrary that Australia must own the annual 8.4 million tonnes of CO2 associated with the production of 421,000 tonnes of exported Victorian aluminium. Alcoa has taken a calculated commercial risk in choosing Victorian brown coal power over say Tasmanian hydro power. If they get hit in the near future by punitive carbon permits/taxes, it will be their risk-taking shareholders who will pay a heavy price for the lack of foresight of their directors in the '70s and '80s. It seems highly unlikely that an aluminium smelter relying on brown coal could survive the imposition of even a token carbon tax when competing against aluminium refined using hydro power. The $200 million saved on the Portland Smelter Agreements can then be applied to doing something environmentally sustainable for the people of the Portland district.

I have made it clear that I do not think Victorians or Australians should have to carry the can for Alcoa's imprudent commercial decisions, but I reiterate that this is not an argument in favour of differentiation. It is an argument for corporate and individual consumers in the world's markets to bear the full brunt of the environmental costs of their consumption.

A practical ten-point plan:

1. A locally-made electric commuter vehicle fleet
for Victoria, to absorb (some of) the expected 750 MW glut of base load electricity if/when Alcoa closes Portland and/or Point Henry. Outcome: manufacturing jobs, reduced oil imports, and net GHG benefit per km travelled compared to burning petrol.

2. Scrap the Energy Card scheme immediately, and use the remaining funds (topped-up as necessary to $500 million) to offer a $500 rebate to the first million households installing a solar water heater. Solar hot water is the Cinderella of the renewable energy industry, but remains the most cost effective greenhouse intervention in terms of kg CO2 saved per dollar invested (2-3 times the greenhouse benefit per dollar of the proposed $10m Crookwell wind farm for example). At the moment the Energy Card scheme results in a 6% fee to AGC, at the expense of the profit margin of the installer. There is far too much talk about photovoltaics on rooftops: these have a lousy greenhouse payback, and investment here should be deferred until solar water heaters are universal and mandatory on new dwellings and offices. Each household with solar hot water saves 5-7 tonnes of CO2 per year compared to electric off- peak water heating. Payback time for consumer 5-10 years: a "no regrets" measure, creating skilled/semi-skilled manufacturing jobs.

3. Mandatory gas stoves wherever reticulated natural gas is available. (banning of replacement/new installation of electric stoves).

4. Improved mandatory insulation standards for all buildings, with solar design criteria for new buildings.

5. Ten year moratorium on the broad-acre clearance of native vegetation. Wood chipping from plantations only. Full GHG audit of any subsequent harvesting of native forests.

6. Mandatory 5% sourcing of wholesale electricity from renewables by 2010, increasing to 10% by 2020. This can include wind farms (with a very short lead-time), new hydro on existing dams, but no Federal funding assistance for photovoltaics until competitive with wind/hydro in terms of GHG saving per dollar invested. Increased costs to be passed on to consumers. Preferential treatment of States with the highest levels of emissions from electricity production i.e. "differentiation": increased renewable sourcing for the worst offending states, not less! That is the correct interpretation of how differentiation should be applied, regionally within Australia and at the global level.

7. Formal mechanisms for environmental expert input to the planning processes of the National Electricity Market, and in all states not yet in the NEM.

8. Formal mechanisms for environmental expert input to the planning processes of transport infrastructure at State and Federal level.

9. Active discouragement of refrigerative airconditioning in temperate (dry-heat) regions of Australia, to be substituted by evaporative air-conditioning wherever a suitable clean water supply is available.

10. Scientifically-based, bipartisan public education campaign on greenhouse issues, and the impact of lifestyle on the environment, with a clear message of disapprobation for the high-living wasters in our midst.

Contact: Michael Gunter
Phone (03) 9376 7515 Fax (03) 9419 1678
Email: mickgg@suburbia.net


Document dissemination:

Submitted to Climate Change Task Force, Department of Foreign Affairs and Trade, Canberra, ACT on 28 October 1997

Hypertext version uploaded to the Internet 29 October 1997