December 2011

The budgetary approach to managing emissions is based on the premise that the Earth’s atmosphere has a limited capacity to accept greenhouse gases. It is generally agreed that in order to stay below a 2oC global temperature rise, we are limited to a total of 1,000 billion tons of greenhouse gases being emitted into the atmosphere. Given the past emissions and the current rate of about 30 billion tons per year, the International Energy Agency (IEA) estimates that the Earth’s carbon budget will be used up by 2017 - a mere five years away.

In early November 2011, the typically conservative IEA came out with a serious warning to the world’s governments. “The world is likely to build so many fossil-fuelled power stations, energy-guzzling factories and inefficient buildings in the next five years that it will become impossible to hold global warming to safe levels and the last chance of combating dangerous climate change will be lost for ever”, according to the most thorough analysis yet of world energy infrastructure.

"The door is closing," Fatih Birol, chief economist at the IEA, said. "I am very worried – if we don't change direction now on how we use energy, we will end up beyond what scientists tell us is the minimum [for safety]. The door will be closed forever."

If the world is to stay below 2oC of warming, then emissions must be held to no more than 450 parts per million (ppm) of carbon dioxide in the atmosphere; the level is currently around 390 ppm. But the world's existing infrastructure is already producing 80% of that "carbon budget", according to the IEA's analysis. This gives an ever-narrowing gap in which to reform the global economy on to a low-carbon footing.”

“If current trends continue and we go on building high-carbon energy generation, then by 2015 at least 90% of the available carbon budget will be swallowed up by our energy and industrial infrastructure. By 2017, there will be no room for manoeuvre at all – the whole of the carbon budget will be spoken for, according to the IEA's calculations.”

The IEA has traditionally been a very conservative organisation - so this warning should serve as a salutary warning to us all.

The Intergovernmental Panel on Climate Change (IPCC), the body of the world's leading climate scientists convened by the United Nations, also issued a report in November that makes warnings about the increased likelihood of serious weather events. They found that “rising sea levels will increase the vulnerability of coastal areas and the increase in extreme weather events will wipe billions off national economies and destroy lives.”

Scientists have warned of these effects for years, but the "special report on extreme weather" compiled over two years by 220 scientists for the IPCC – is the first comprehensive examination of scientific knowledge on the subject - in an attempt to produce a definitive judgment.

In the same period, The Australian Government passed the Clean Energy Future legislation in the Senate. After years of vacillating, it represents a major step forward. However, its 2020 greenhouse gas reduction target is modest at 5% (from 1990 levels).

This modest target does not address Australia’s role in the production of global greenhouse emissions. Along with other major energy exporters, Australia may be called to account for the profits generated from the sale of coal and Liquefied Natural Gas (LNG).

Australia currently produces about 500 million tons per year of greenhouse gases (the world’s annual is about 30,000). However, by 2020 Australia hopes to export about 500 million tons per year of coal and about 100 million tons/yr of LNG. Together, these two energy resources combined represent about 1,800 million tons per year of greenhouse gases (about 3 tons of gases per ton of fuel).

Together with the greenhouse gases produced in Australia, the inclusion of exports brings the total to about 2,300 million tons per year. This puts Australia into third place in the world as an emitter - only behind China and the US.

Although it is currently normal practice for only in-country emissions to be counted - is it possible that one day before 2017, countries will hold Australia and other energy exporting countries accountable for its fuel exports as well?

The concept of product stewardship is accepted and well understood in many industries. The uranium, chemicals and weapons industries all have a well-developed approach. Product stewardship requires that all participants in the product’s life cycle use the product responsibly and ensure they have minimal negative impacts on the environment.

When will the pressures from the Budgetary Approach focus attention on Australia’s windfall revenues from the export of energy resources? By digging up these fuels and exporting them, Australia has a direct impact on global greenhouse emissions - without paying for the cost of the externality.

Will Australian coal exporters be pressured to insist their customers burn the coal in a manner that minimises greenhouse gas emissions? Will the customers be forced to use carbon dioxide sequestration? What will that do to the price of coal?

It was recently reported (30/11/2011 - The Age) that Australia has committed to $232 billion in confirmed investment in resource projects and another $224 billion in projects is planned, but not committed projects. When the business cases for the investments in these projects are presented to Boards, do they factor in the potential risk from product stewardship?

It was Sheik Yamani (Head of OPEC for many years) who said - “The end of the Stone Age did not end because we ran out of stones.”

Ben Scheltus
CEO, Climate Alliance