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Coal casts shadow over climate talks

Monday 30 November 2015 | Published in Regional


OPINION By Ian Verrender ABC Business Editor PARIS – Coal is the elephant in the room at the Paris climate summit starting today, as economics, energy poverty and the mining lobby all combine to ensure the meeting will be both a triumph and a disappointment, writes Ian Verrender.

If history is any guide, the climate talkfest that gets under way in Paris this week will be both a triumph and a source of bitter disappointment.

Despite mounting, indeed overwhelming scientific evidence, it is unlikely any meaningful agreement will be hammered out by the gaggle of presidents, prime ministers and premiers assembling in the City of Lights.

The triumph is evidenced by the almost universal acceptance among world leaders that climate change is occurring, that human activity is a major contributing factor and that urgent action is required if we want to maintain a healthy planet.

The disappointment will be more gradual. For despite the grand statements of intent as they stand united, drenched by waves of camera flashes – conflicting agendas and the vested interests driving them is likely to inhibit the acceptance of any workable solution.

Instead, we will be presented with resolutions on lowering global temperature and commitments to limit carbon emissions by a specific amount at some stage decades down the track. Missing will be any unified strategy on how best to achieve that result.

The only viable strategy to limit carbon emissions is to put a price on carbon. But don’t expect that any time soon. For it is a strategy that ensures the pain will not be evenly borne and will unsettle corporations and countries.

The developing world rightly points out that it is developed nations that have grown rich over the past century-and-a-half burning fossil fuel, who have created the problem and who now want to deny them the opportunity for advancement.

Within the developed world, there is just as much pushback. Coal exporting nations such as Australia have become the targets of furious lobbying from an industry that suddenly has found itself under threat and its future in jeopardy.

That strategy was exemplified by former prime minister Tony Abbott in his landmark “coal is good for humanity” speech in October last year, just as he was opening a new Queensland mine.

While it stunned many in the community, as Abbott added to his ever-expanding list of embarrassments, for those associated with Peabody – the world’s largest private coal company – it bore a striking resemblance to the company’s very own pitch, which had been devised by American public relations firm Burson-Marsteller.

In an effort to spur demand, the global spin doctors had whipped up a slick PR campaign for Peabody targeting China, America and Australia titled Advanced Energy For Life, to educate leaders about the need to eradicate “global energy poverty”. It’s a campaign since adopted with gusto by the Minerals Council of Australia.

While this newfound angst to alleviate the plight of the world’s poorest is laudable, it’s curious that it only seems to have become an issue since coal prices collapsed. Alleviating “energy poverty” was never on the horizon when coal prices were four times their current value.

Interestingly, in a study on Peabody’s commitment to addressing energy poverty entitled All Talk No Action, The Australia Institute notes that the company provides no money to the United Nations or any other body engaged in efforts to solve the problem.

What Peabody says and what it does about energy poverty are very different.

Although the company contributes to many charitable causes, it does not donate money, staff time, expertise or discounted fuel to any project that directly alleviates energy poverty.

Business leaders are bound by a legal imperative to act in the best interests of the company. That’s generally interpreted as maximising benefits to shareholders. Essentially, that means maximising profit.

The effect is that business leaders legally cannot play a role in addressing issues like climate change, unless they can demonstrate an improvement to the bottom line. And it explains why business leaders will go to extraordinary lengths to resist changes that may harm earnings or to minimise the fallout from government decisions.

It’s worth remembering that BHP Billiton’s former chief, Marius Kloppers, began the campaign for the introduction of a carbon price that shifted the national debate. Why? It’s a fair bet he saw a price as inevitable and wanted to ensure a scheme was introduced that caused the least amount of damage, to have some control over the outcome.

Once again, a schism is appearing within the Australian business community over climate change in general, and coal in particular.

During the past few months, each of Australia’s big four banks have outlined policies limiting credit to coal miners, seemingly ignoring the exhortations of the former PM.

This is not a radical attempt to undermine an industry. Nor is it a deliberate effort to appear green, although they will happily accept the plaudits.

Instead, it is a rational approach to business. Mines take years and vast amounts of money to develop. Right now there is a glut of coal and with the prospect of a slowing Chinese economy that is likely to remain the case for many years, making the medium-term case for coal unappealing.

But the biggest risk in financing coal right now is the risk of a carbon price that could price coal out of existence and lead to multi-billion dollar losses for those who stumped up the cash.

A new book by Newcastle University’s Daniel Nyberg and Sydney University’s Christopher Wright, Climate Change, Capitalism and Corporations: Processes of Creative Self-Destruction, delves into the complex relationships between corporations and climate.

They argue that while many global businesses promote a message of “action” and “leadership”, this ignores the deeper problem that humans have become a force of nature and that capitalism is “locked into a cycle of promoting ever more creative ways of exploiting nature and destroying a habitable climate”.

Energy is fundamental to human survival. Weaning ourselves off fossil fuels will be enormously difficult but perhaps not impossible. Sceptics continue to point to the prohibitive cost of alternative energy sources such as solar, all the while ignoring the huge drop in costs in solar technology in recent years as demand and production of solar power systems has soared.

From a scientist’s point of view, it’s worth noting that solar energy is not exactly alternative. All our energy derives from the sun, including fossil fuels that merely are reservoirs of solar energy from eons ago.

Battery systems to store solar energy already are available at a retail level and will become more price competitive. They may well render large power plant and energy transmission grids obsolete in the longer term and may provide the answer to “energy poverty” across the developing world, just as Peabody hopes.

But speeding the process along will require a carbon price. And as IMF chief Christine Lagarde recently noted, a carbon tax may well be superior to an emissions trading scheme. It is an argument backed up by that bastion of left wing radicalism, The Economist, last week.

Don’t bank on anything like that coming out of Paris though. The lobbying already is at fever pitch.

- Ian Verrender is the ABC’s business editor and writes a weekly column for The Drum.

Pollution prompts ‘orange alert’

BEIJING – The authorities in the Chinese capital, Beijing, have issued their highest smog warning so far this year.

The “orange level” alert declared on Sunday is the second highest possible, requiring factories to cut production.

Some pollution readings in parts of the city reached about 17 times the level considered safe by the World Health Organisation.

China’s state media says the declaration of this orange level alert requires industrial plants to reduce or shut down production.

Some reports suggest that visibility has fallen to a few hundred metres in some places.

At noon on Sunday, the air pollution monitor operated by the US Embassy in Beijing reported that the intensity of the poisonous, tiny particles of PM 2.5 reached more than 400 micrograms per cubic metre in some of the worst-affected areas.

The World Health Organisation considers 25 micrograms per cubic metre to be a safe level.

Coal-powered industries and heating systems, as well as dust from construction sites, all contribute to the smog which has been exacerbated by humidity and a lack of wind.

A cold front, expected to arrive on Wednesday, should bring some relief.

Air pollution is a perennial problem in China’s northeast which is home to many heavy industries including coal mining.

Earlier this month, China’s state media and many residents criticised high pollution levels in the north-eastern city of Shenyang.

The People’s Daily said PM 2.5 levels exceeded 1400 micrograms per cubic metre.

Earlier this year China’s environment ministry announced that only eight out of the country’s 74 biggest cities had passed the government’s basic air quality standards in 2014.