[This is the first of an occasional series on what we can do to make our presence on Earth tolerable to the rest of the biosphere, and mostly should do anyway, regardless of one’s view of the dangers or possible means of salvation. It will be filed under ‘Solutions’.]
Australia is one of the largest emitters per capita of greenhouse gases. We are also the world’s largest exporter of coal, which is the dirtiest fuel in terms of greenhouse gas emissions. We must therefore be the world’s worst citizens regarding global warming. However we could be rapidly cleaning up our act, and diversifying and improving our economy in the process.
The importance of the mining industry as a whole to Australia’s economy is greatly exaggerated in public perceptions. Although the mining industry accounts for about 9% of GDP, it accounts for less than 2% of total employment, and exchange rate and other effects actually reduce the contributions of other sectors, so the net benefit to the economy is reduced. Coal is said to provide cheap electricity, but the coal industry receives direct and indirect subsidies, up to a billion dollars a year in NSW alone. Subsidies to Australian mining are estimated to be well in excess of $10 billion per year. Coal exports are rising rapidly, mainly to China and India, and it is claimed we are only responding to demand, so if we didn’t sell them coal someone else would.
Such arguments overlook both the distortions of the present energy market and the great opportunities we have to develop clean alternatives and to export those to the world. Instead of encouraging the developing world along the same dirty-energy path we have followed, we could be teaching them to move directly into clean, efficient and safe energy paths.
The quickest and most cost-effective improvement we can make is to stop wasting energy. We waste so much energy, compared with current best practice, that a study by McKinsey Australia estimated in 2008 that we could save $50-200 per ton of greenhouse emission avoided, mainly by improving building designs, air handling systems and industrial motor systems. These savings could fund further low-cost gains that would reduce our greenhouse emissions by 20% below 1990 levels by 2020.
In other words, because of our sloppy habits, we are actually paying extra to pollute the world. We could go well beyond the Government’s timid goal of a 5% greenhouse emission reduction by 2020 for essentially no cost to the economy. Many studies of the US economy have reached similar conclusions.
Such claims are commonly disbelieved or disputed, but their plausibility has already been demonstrated on the large scale. Between 1975 and 2005 the energy intensity of the U.S. economy (the ratio of primary energy end uses to GDP) decreased by 46%. The energy thus liberated for other uses by greater efficiency was four times as much as the energy provided by new generation facilities, and its cost was equivalent to about $12 per barrel of oil.
The reasons we don’t take advantage of this great opportunity seem to be several. It is easier to keep doing things the way we always have. Up-front costs are often lower, even though the payback time for a small extra investment in better design is short. Builders, architects and designers don’t pay the on-going costs of inefficient buildings and factories, so they have no incentive. Fossil fuel industries keep up a steady chorus of disinformation, claiming that alternatives are expensive and impractical.
It is notable that these reasons win out even though we could save a lot of money, collectively, by changing our sloppy ways. It shows that market incentives that already exist are not working. This clearly implies that weak additional incentives like the Government’s carbon price scheme will have little effect.
What is needed instead are active programs that address these impediments. We could teach the professionals and trades-people how to improve building design and performance. It costs time and money to change practices, so these need to be compensated so people will adopt better practices. Once they start to become widespread, laggards will have to follow and transition costs will fall.
We can demonstrate model contracts that give architects and builders incentives and rewards for improving efficiency. For example some of the savings on energy costs could be shared back to builders over the first few years’ operation. Unless efficiency is a made a design goal from the beginning, many opportunities are lost. However a well-integrated design yields synergies that can result in dramatic savings, reducing energy costs not just by percentages but by factors of 2, 4 or more.
California in the 1980s demonstrated an innovative way to overcome resistance to up-front costs, though in that case it was for retrofitting rather than new construction. Electric utilities were required to offer small loans to people so they could reduce their homes’ energy use . The loans could be paid back through the electric bill. Smaller electricity use compensated for some or all of the extra repayment on the loan, so it was a relatively painless way for home owners to improve home energy efficiency.
The Californian electric utilities actually invested in lowering electricity use. This approach addresses one of the most widespread market failures behind resource over-use: usually, the more we use the higher are the suppliers’ profits.
You could say the utilities were investing in the end-result of energy use: comfortable homes. It was possible because electric utilities were regulated, because of their natural monopoly. It shows that government can be good.
As such practices are applied and refined, the ideas can be passed to developing countries so they can build efficiently from the start. We would be investing in a comfortable planet.
1. von Weizsäcker, E., A.B. Lovins, and L.H. Lovins, Factor Four: Doubling Wealth, Halving Resource Use. 1997, St. Leonards: Allen & Unwin.