Stranded Government = Stranded Assets

Two of the articles in this morning’s edition of The Conversation fit rather well together. The first, by Kerry Brown, Executive Director, China Studies Centre at University of Sydney, is entitled US–China emissions deal will put pressure on Australian growth. The second, under the heading Narrow G20 agenda must go ‘structural, social and green’ is by Charis Palmer, Business Editor at The Conversation.

I hope the authors won’t mind if I run parts of their stories together.

[From Kerry Brown’s article:]
>>While most of the world is celebrating the US–China pact on climate change, the deal puts pressure on the Australian government and resources companies to rethink relations with China.

The deal, signed at the APEC summit in Beijing this week, includes agreement to cut emissions and work together to mitigate the impact of climate change. For the first time China has set 2030 as the year in which its emissions are expected to peak. The deal creates a common framework with the United States, the other largest greenhouse gas producer in the world, to take action.

Chinese President Xi Jinping started the APEC summit hoping for blue skies in the capital. With this deal, he is showing he is prepared to take action to achieve this.

For Australia this means that environmental compliance costs in China will rise. Australian companies will have additional costs of doing business there. Meanwhile Chinese companies will drive a harder bargain as their cost base lowers.
Australian resource companies, which are already suffering a dip in their relations with their largest clients, will experience more of a squeeze on their profits. This will impact Australia’s overall growth rate.

News of the agreement comes as India announces plans to stop thermal coal imports in three years. Australian coal companies will not even have a significant alternative export market to China.

This means the Australian government needs to rethink our economic engagement with China. This is not just about refocusing our export emphasis from resources to services. It is about truly partnering with China in its environmental challenges, rather than adding to them.<<

[then from Charis Palmer’s article:]
>>Professor Kirton [University of Toronto G20 Research Group leader] said since the very first summit the G20 had repeatedly, at every summit, dealt with climate change.

“And its performance has increased. It’s done a lot of good.”

He said even if the G20 leaders kept to their 2009 agreement to phase out fossil fuel subsidies in the medium term, they could solve one-tenth of the climate change problem in terms of greenhouse gas emissions.

“They could save the hard-pressed taxpayers about three quarters of a trillion dollars – that’s how much fossil fuel subsidies cost.”<<

So, following the Abbott mantra that coal is Australia’s future, we are going to bet our future on selling coal to China where they are intent on slowing their emissions so that they peak in 2030 and reducing them thereafter, and where in 2013 more renewable electricity generation was installed than fossil-fuelled generation. And our alternative market, India, plans to stop thermal coal imports in three years, and is moving toward renewables.

This seems like the scenario you’d invent if you wanted to demonstrate how a country like Australia, rich in renewable energy resources and with a highly innovative research and industrial capacity, could become the home of a massive collection of stranded assets – coal mines, coal railways, coal processing plants, coal ports, …

It’s a scenario whose impacts could be softened by immediately putting into action the 2009 G20 commitment to phase out fossil fuel subsidies, something the Australian government has resisted despite pressure from a range of internal sources. (I wonder if we will hear more about subsidies at this G20?)

Looks to me like we are heading toward a government with a globally stranded policy position in the short term and a nation of stranded assets in the medium term, unless Abbott (or his successor) is prepared to turn current policy 180 degrees and get on-board with seriously addressing climate change.

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