It’s OK to talk about carbon emissions again – views from the Summer Study on Energy Productivity

Dr Steven Kennedy

Finally! After 20 years or so of governments running energy policy as an economic reform divorced from climate policy, it looks like a revolution in thinking has begun, one of major benefit to energy consumers and the global environment.

Signalling that national energy policy and climate policy must be aligned, one of Australia’s most senior energy bureaucrats has declared that “the most compelling argument” for improving energy productivity is the need to cut carbon emissions.

In a keynote address to the Australian Summer Study on Energy Productivity in Sydney last week, Dr Steven Kennedy, a deputy secretary of the Department of Industry, Innovation and Science, ran through all the accepted barriers to the optimal adoption of energy savings solutions then told his audience that while these all required policy responses, “the most compelling argument for improved energy productivity in Australia is the role it can play in lowering Australia’s emissions, and helping the government to meet its emissions reduction target.

Wrapping up his talk, he added: “There’s little doubt that the integration of climate and energy policy sits at the centre of all domestic and global solutions to the challenge of climate change.”

Dr Kennedy, an economist, was previously a deputy secretary in the Department of the Environment. He headed the secretariat of the Garnaut Climate Change Review Update in 2011. His comments were a highlight of the three-day session. Others were:

  • Speakers highlighted that globally the coal industry is in structural decline
  • The jobs benefits from energy productivity improvements are huge and not sufficiently acknowledged
  • Even some in the power industry now accept that time-of-use electricity tariffs don’t work [See separate story]
  • A new approach to mandatory disclosure of residential energy efficiency is underway

Responding to Dr Kennedy’s comments, leading commentator and RMIT senior industry fellow Alan Pears said: “It was exciting to have a senior energy public servant finally acknowledging the significance of climate change for energy. It’s been a long time coming. Now, if we can just get the politicians to support energy reform consistent with climate response it would be transformative.”

“Energy productivity” is the new buzzword in energy efficiency circles. While “energy efficiency” covers the efficiency of energy use, energy productivity relates energy use to the value of economic output, either of a company or a country. The US has a national goal of doubling energy productivity by 2030; Australia’s target, issued in December, is for a 40 per cent improvement.

The summer school attracted, according to the organisers, over 230 delegates across the three days.

Kateri Callahan, president of the US Alliance to Save Energy, said her organisation had produced 54 recommendations that, combined, showed how the US could double energy productivity by 2030, a goal President Obama had adopted.

Ms Callahan highlighted the multiple benefits of such a target for the US.

“This is what compels action in the US by businesses and also by our government leaders: the astounding impact of doubling energy productivity on the economy,” she said.

“We will avoid $327 billion annually [in energy bills, by 2030]. We’ll have that money to pump back into more useful purposes in our economy. We will create 1.3 million jobs.

“We will effectively reduce our need for imported oil and become energy independent and while we’re doing that we’re going to move the dial back on the loading of CO2 into the atmosphere to be a third below where they were in 2005, so beating the commitment we made in Paris. These are very significant consequences of doubling energy productivity and they don’t just hold true for the US, they hold true for any economy.”

Asked what she thought of Australia’s more modest goal to improve productivity by only 40 per cent, Ms Callahan said she’d seen no studies from the US, Europe, Saudi Arabia, China or by the Australian Alliance to Save Energy that suggested a doubling was not possible.

“Be as ambitious as you can,” she urged delegates. “Because the benefits, the return on your investment, for being that ambitious are just huge.”

Australia’s energy efficiency performance down

Steve Nadel, executive director of the American Council for an Energy-Efficient Economy, noted Australia’s performance in energy efficiency internationally on the ACEEE’s international policy scorecard had dropped from sixth in 2012 to 10th in 2014, due to weaker national policies.

Sarea Coates from the Department of Industry, Innovation and Science spoke of a reinvigorated approach to national energy efficiency. She said that already this year the department had issued a Regulatory Impact Statement for the expansion of the CBD Scheme, the Clean Energy Finance Corporation was now investing in energy efficiency, a vehicles emissions paper had been issued, and disclosure of residential building energy use was back on the agenda.

On this last point, Ms Coates said a workshop of all states and territories on the issue had been held four weeks ago and all attendees had agreed it should be back on the agenda. She said there was “real momentum” on the issue.

Noting Australia’s role as the world’s largest coal exporter and one of the largest exporters of liquid natural gas, overseas speakers provided fresh perspectives on the prospects for coal.

Steam trains will not come back. Neither will coal

Philip Sellwood, chief executive of the UK Energy Saving Trust, said it was clear the investment community globally had made its decision.

“It’s over,” he said. “Now you might argue as the government here [has] – and that’s for them to decide because they’re elected and I’m not – they might decide Canute-like that the tide is not coming in.

“It’s only a matter of time. And I don’t disagree that this is going to lead to conflict, antagonism, but the facts are the facts and you’re not going to change them. And there are still, no doubt, people somewhere in the world who would support the return of steam trains. It’s not going to happen.”

A 99 per cent share price fall? That’s the new reality

David Hochschild, commissioner of the California Energy Commission, told the Summer School that in 2011 coal provided the majority of America’s electricity, and that the coal had been supplied mostly by four companies, Peabody, Arch, Alpha and Cloud Peak Energy, and that their combined stock market value had fallen by 99 per cent in that time.

“They are currently worth one per cent of the value they had six years ago,” he said. “That is the steepest decline in value in the history of the energy industry. We are at the beginning of the end of the coal era. This is a very significant moment when you think about the role coal has played.”

The Fifth Estate checked this. All four companies’ share prices are accessible via the internet for a five-year time frame. Share prices in $US from 4 March 2011 to 26 February 2016 were:

  • Peabody $1040.25 to $2.09
  • Arch Coal $3599.00 to $0.45
  • Alpha Natural Resources $56.77 to $0.02
  • Cloud Peak Energy $21.29 to $1.60

Mr Hochschild said that, contrary to former PM Tony Abbott’s claim in 2014, coal was not the future.

“The British Empire was created based on coal power,” he said. “In the United States civil war, the north had a 28 to 1 coal advantage over the south, which affected the outcome of the war. Coal has powered the United States economy for decades, as in China, and it continues in Australia.

“But coal is not our future; coal’s our past. And the question is what comes next. Happy to report this past year in the United States, for the first time, renewable energy was the majority of new electric generation capacity added – and the trend continues.”

And from the NSW government? Nothing much

In his opening address, NSW Minister for the Environment Mark Speakman showed no personal engagement with the conference topic. He offered nothing fresh, suggesting to delegates that the NSW government is unmoved by the implications of the December Paris climate agreement. As he did at the Nature Conservation Council annual conference last October, Mr Speakman timed his appearance to ensure no time for questions. He read his speech and bolted.

Gavin Gilchrist is a former journalist, author, SEDA manager and clean energy entrepreneur now looking around for new opportunities.

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