Inside Story

Can we break the climate cycle?

Human psychology might finally be on the side of decisive action to decarbonise Australia’s economy

Tristan Edis 1 June 2020 1425 words

Right climate: prime minister Kevin Rudd arriving in Bali for the December 2007 UN climate talks. Dimas Ardian/Bloomberg via Getty Images

What does the pandemic-induced recession mean for clean energy and decarbonisation? It’s a question lots of people have asked me recently, and it invariably takes me back to a conversation I had in 2007, the year before the global financial crisis.

I had bumped into an old university friend at a friend’s wedding. One of the smartest in our year, he’d ended up in Macquarie Bank’s “millionaires factory,” at the very pinnacle of the economy, sewing up multibillion-dollar deals for airlines, airports and other major infrastructure.

I wasn’t making anywhere near as much money as he was, but I had just spent the most rewarding twelve months of my life working for the main industry association representing the clean energy industry. Before that, I told him, I’d felt like I was banging my head against a brick wall. I’d spent the first six years of the decade battling for an emissions trading scheme, or ETS, an expansion in renewable energy and half-reasonable energy-efficiency standards, at every turn rebuffed by the Howard government. And no one seemed to care: while I struggled to get the media interested, the government rode high in the polls.

Then, suddenly, the wall had crumbled. In the last year of the Howard era, emissions trading became bipartisan policy and the Renewable Energy Target was to be expanded to 15 per cent (although rebadged as a Clean Energy Target). After a big battle with the Housing Industry Association we had managed to get a five-star efficiency standard for new homes. Horribly inefficient conventional lightbulbs would finally be phased out. Heck, we’d even got the rebate for solar panels doubled from $4000 to $8000 without even asking.

My friend just nonchalantly remarked, “Yeah, it’s the economy. Everything is going well. When people feel economically secure they start to worry about more than just themselves and start to think broader and more long term.”

Given his intelligence and vantage point I couldn’t simply dismiss his observation. But I felt like shouting, “No, you’re wrong! This is a permanent change in perspective. People have now woken up to the fact that global warming is a massive threat to humanity.”

At the time, Australia was in the grip of the Millennium Drought. Water storages in every mainland capital had fallen to near-emergency levels. State governments were pursuing an option previously restricted to Middle Eastern countries: desalinated sea water. City dwellers saw their gardens dying; farmers watched their crops fail and their livestock starve. This incredibly long and severe drought had set people to wondering. This isn’t normal, why is it happening?

It was as if the severe drought had created in people’s minds something like it was creating in the surrounding bush — a tinder-dry underbrush of questions about what was unfolding with our climate. All it took was a few well-placed matches from the likes of Al Gore’s An Inconvenient Truth and Nicholas Stern’s report on the economics of climate change to set it alight.

A few months later, Kevin Rudd sailed into government with a major climate change agenda. His government ratified the Kyoto Protocol and released a comprehensive plan for an ETS. In the United States, the Republican presidential candidate, John McCain, didn’t just accept the need to act on climate change; his name was on several bills to introduce a national ETS across the United States.

Then the financial world collapsed. Labor continued to pursue its climate policies, but more slowly, distracted by the threat of a deep recession. Business leaders who had been reasonably supportive of an ETS became increasingly strident in their claims that economic disaster would strike if they weren’t exempted from the scheme. A Coalition faction led by Nick Minchin argued that we could no longer risk job losses from the scheme.

In December 2009, Malcolm Turnbull was replaced as opposition leader by Tony Abbott. Less than six months later Kevin Rudd abandoned the ETS.

Then it started to rain, or rather pour. Victoria experienced major flooding in September 2010, Brisbane over the subsequent summer. Desalination plants were put into mothballs. By 2011 polls were showing that Australians’ concern about climate change had waned considerably.

While Rudd’s successor, Julia Gillard, ultimately legislated an ETS (thanks to pushing by the Greens and independents), it was dead on arrival. Investors could see that Tony Abbott was an unbackable favourite to win the next election, so none of them would risk their money on ventures requiring an ongoing carbon price. Investment in large-scale renewables projects completely dried up as financiers fled in the face of Abbott’s expected axing of the Renewable Energy Target.

What in 2007 had seemed to be a permanent change for the better was revealed to be transitory. It seemed that my friend was right.

The parallels between then and now are striking. Just a few months ago Australia experienced bushfires so extreme in scale and duration that large segments of the population and the media were again wondering out loud: isn’t this the climate change we’ve been warned about?

The fires were preceded and largely facilitated by an extraordinarily severe drought that had also savaged agriculture. They began in late winter and lasted all the way to February, and they were terrifyingly huge. The Morrison government found itself pounded day after day about why it was doing so little to reduce Australia’s emissions and encourage greater global action. All sorts of rumours began swirling that the government would cave to the pressure, including adopting a net-zero emissions target for 2050.

But then it started to rain. Sydney’s water storages surged to almost 90 per cent capacity. Good rains fell across the east coast of Australia. And then Covid-19 came along and we suddenly had other things to worry about.

Now it is possible, indeed logical, for Australian governments to use the need to bring the economy back to life as an opportunity to rejuvenate and decarbonise our electricity system — not simply by building more solar and wind farms, but by creating a national system fit for the future.

The relatively weak interconnections between state electricity systems have always been a problem for competition, and hence prices, and even more so as variable wind and solar power takes a bigger share of the market. Building new transmission capacity would improve reliability and lift competition while simultaneously opening up areas holding rich wind and rich solar resources. Proposed pumped hydro projects dotted through New South Wales, Tasmania and South Australia would balance out the variation in wind and solar.

Another opportunity lies at the smaller scale of households. Ranked according to the proportion of households with solar systems, Australia leads the world. Around one in three households in South Australia and Queensland have a solar system, one in four across Western Australia and one in five in New South Wales. This is a solid foundation for a world-leading roll-out of home battery storage and smart-internet controls of appliances to help manage demand. True, batteries are expensive, but so were solar panels back in 2008 when Australia started its path-breaking household solar journey.

This rejuvenation of the electricity system wouldn’t come cheap. But it would be a far more productive use of taxpayers’ money than the $80 billion the government is planning to spend on submarines that might be obsolete by the time they are finished. Given the likely trend to working from home, it’s also a better bet than new roads. Borrowing money has never been cheaper and superannuation funds are desperate for large-scale investments offering long-term returns.

The federal government has taken an interest in some elements of this program. But the many passionate climate sceptics within the Coalition will furiously press the cost-of-living button to combat any proposal to displace fossil fuels. They’ll be on shaky ground, though. New electricity infrastructure could be underpinned by budgetary measures rather than surcharges on energy bills. With interest rates so low, the extra cost to taxpayers would be small and would be substantially offset by enhanced electricity market competition.

My friend was probably right about human psychology, but perhaps it can be harnessed to push along efforts to contain global warming rather than hinder them. Economically insecure voters focused on the short term may be more than happy for the government to take on low-interest debt long into the future if it will provide jobs and economic stimulus in the here and now. •

Funding for this article from the Copyright Agency’s Cultural Fund is gratefully acknowledged.