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INNOVATIVE SOLUTIONS FOR A SUSTAINABLE FUTURE
TOWARDS
A SUSTAINABLE
Dr T M ROMBERG
March 1998
CONTENTSAUSTRALIA’S PRIORITIES AT KYOTO SUSTAINABLE ENERGY SCENARIO ANALYSIS A ‘MINIMALIST’ ENERGY SCENARIO APPENDIX – GREENHOUSE GAS EMISSION MODELS
Press your browser BACK button to return to this Contents list EXECUTIVE SUMMARYThe Third Conference of the Parties (COP-3) held last December in Kyoto, Japan, focussed the world’s attention on global warming due to greenhouse gas emissions by developed and developing nations. Australia, with its abundance of natural energy resources, particularly coal, argued strongly for acceptance of its ‘differentiation framework’ by other developed nations, under which legally binding national environmental targets were balanced with ‘equity and fairness’ by economic factors impacting on a nation. Although it did not receive much support for its ‘differentiation’ position in the lead up to Kyoto, Australia was able to successfully negotiate a less stringent greenhouse emissions target than other developed countries of an 8% increase in emissions from 1990 levels by 2008–2012. Only two other developed countries, Iceland and Norway, were allowed increases in their greenhouse gas emissions of 10% and 1% respectively. A previous report investigated alternative energy scenarios for achieving a sustainable energy future for Australia [1], and analysed a number of clean energy scenarios based on a uniform 15% reduction in our greenhouse gas emissions from 1990 levels as proposed by the European Union. It concluded that Australia’s compliance with the E.U. target would require a radical shift in energy policy from a fossil fuel based economy to a natural gas based economy in the medium term and a renewable/nuclear energy based economy in the longer term, and is likely to be cost prohibitive in the medium term. The report included a discussion on the economic impact of environmental targets based on estimates of the costs involved and the benefits gained from environmental measures that are implemented to reduce greenhouse gas emissions, as well as the long-term penalties incurred if the measures are not implemented. It noted that the ABARE econometric models did not include a comprehensive analysis of either the economic benefits or the long-term penalties, and as such, their economic forecasts are pessimistic ‘worst case’ scenarios and do not provide a comprehensive platform on which to base a national policy on climate change. The present report investigates Australia’s energy options within the context of the Protocol target negotiated at Kyoto. Australia has won a valuable reprieve in Kyoto, and under the Kyoto Protocol, we are committed to reducing our greenhouse gas emissions on a ‘business as usual’ basis by some 28% in 2010 in order to achieve the Protocol target of 8% above 1990 levels by 2008–2012. As previously, a range of coal gasification, natural gas and renewable energy scenarios are assessed against a revised ‘sustainability criteria’ based on new target reductions in CO2 emissions of 28% in 2010 and 38% in 2020. The conclusions that can be drawn from our energy scenario analyses are:
Our analysis also shows that a review of current energy policy aimed at more effective exploitation of our vast natural energy resources in the national interest is required to secure a sustainable energy future in the longer term. It is envisaged that such a review should include greater exploitation of our renewable energy resources, such as the commercial development of suitable hot rock and tidal sites for electricity generation, as well as the scope for re-establishing a nuclear power program and the associated infrastructure for more effective exploitation of our vast natural uranium resources. In the context of global warming, these renewable/nuclear technologies have the potential to yield the greatest economic and environmental benefits for Australia rather than simply exported overseas. Therein lies the true Greenhouse Challenge for Australian industry.
Dr T M Romberg March 1998
AUSTRALIA’S PRIORITIES AT KYOTOThe Third Conference of the Parties (COP-3) held last December in Kyoto, Japan, focussed the world’s attention on global warming due to greenhouse gas emissions by developed and developing nations. Australia, with its abundance of natural energy resources, particularly coal, argued strongly for acceptance of its ‘differentiation framework’ by other developed nations, under which legally binding national environmental targets were balanced with ‘equity and fairness’ by economic factors impacting on a nation. Although it did not receive much support for its ‘differentiation’ position in the lead up to Kyoto, Australia was able to successfully negotiate a less stringent greenhouse emissions target than other developed countries of an 8% increase in emissions from 1990 levels in the year 2010. Only two other developed countries, Iceland and Norway, were allowed increases in their greenhouse gas emissions of 10% and 1% respectively. AUSTRALIA’S RESPONSE TO CLIMATE CHANGE In a statement to the Federal Parliament on 20 November 1997, the Prime Minister stated that the Government’s priorities at Kyoto would be [2]:
In announcing new domestic greenhouse measures, the Prime Minister noted that:
The package of measures announced by the Prime Minister are designed to reduce Australia’s projected growth in greenhouse gas emissions from 28% in 1990–2010 to 18% (excluding land use change), and includes:
NEGOTIATING POSITIONS OF MAJOR TRADING PARTNERS The negotiating positions of the major developed countries in the lead up to the Kyoto talks are shown in Figure 1. The European Union (E.U.) was the first to announce a uniform target of 15% below 1990 levels by 2010, and that they would be seeking to make the target legally binding in accordance with the Berlin mandate of 1995 [3]. The impact of this target on Australia’s energy future was investigated in the previous report [1], which concluded that a radical shift in Australia’s current energy policy
Figure 1 – Target emission reductions of major trading partners based on 1990 levels would be required, and that it would be cost prohibitive in the medium term. The special circumstances that would enable the E.U. to achieve this target are noted in the Prime Minister’s statement outlined in the previous section. Not surprisingly, this target was resoundingly rejected by the Federal Government [4]. Japan proposed a greenhouse emissions target of 5% below 1990 greenhouse gas emission levels by 2010, but with scope to allow for variations between countries; for example, it has proposed that Australia reduce its greenhouse emissions to 1.8% below 1990 levels by 2012 [5]. The United States proposed a return to 1990 greenhouse emission levels by 2010 based on a ‘stabilisation’ target average emissions between 2008–2012 and a reduction to 5% below 1990 levels by 2015, as well as a cap on emission levels by developing countries [6]. Media coverage of the Kyoto talks highlighted the differences between the competing negotiating positions being adopted by the developed countries, and speculated whether any agreement would be reached. Australia remained firmly committed to its differentiation position and resolutely refused to be a signatory to an Agreement which did not include land use and forestry in the agreed target. Land use and forestry or, more appropriately, land clearance and deforestation, and contributed some 23% to Australia’s greenhouse gas emissions in 1990, Figure 2, and constituted a significant reduction in the capacity of our forests as a sink for absorbing our CO2 emissions. Australia’s negotiators were successful in having this component included in the Agreement, and were able to negotiate an emissions target of 8% above 1990 levels by 2010. This target is compared with those of our major trading partners in Figure 3, and was immediately hailed as a political coup by the press. While the outcomes from
Figure 2 – Sector contributions to Australia’s greenhouse gas emissions (1990) Kyoto may have satisfied the Federal Government’s political objectives, it is debatable whether they are in Australia’s best interests from an environmental viewpoint in the longer term. However, whatever personal view we may hold on this issue, it is abundantly clear that we have been offered a ‘breathing space’ by the international community to ‘get our house in order’, and we would be foolish to waste this unique opportunity and expect the same lenient treatment next time around. Therein lies our collective responsibility. IMPORTANT NOTE: The target reductions for 2010 given in Figure 3 are assumed to extend to the year 2020. This assumption underlies the sustainability criteria used for evaluating the various energy scenarios analysed in the next section. However, it is possible that our target reduction in greenhouse emissions post 2010 may be increased to bring us more in line, over time, with other developed countries.
Figure 3 – Target emission reductions of major trading partners based on 1990 levels negotiated at Kyoto
AUSTRALIA’S ENERGY OPTIONSAustralia is richly endowed with natural energy resources, which include: natural uranium; black and brown coal; oil; natural gas; water (hydro and tidal); solar, wind and numerous ‘hot rock’ sites. Electricity generation is currently by: coal-fired power stations (80%); hydro-electric power stations; diesel electric power generation; solar and wind energy systems. In more recent times, natural gas cogeneration plants are being introduced for their environmental benefits over coal-fired plants. A number of national energy options have been, and are being, investigated since the 1940s. These were reviewed briefly in reference [1] in descending order of energy intensity (or energy per unit volume of the resource), and this review is reproduced here for completeness. FOSSIL ENERGY Conventional Coal-fired Combustion The direct combustion of coal in conventional coal-fired power stations has been covered in a previous report [7]. This method of electricity generation is used as the datum for calculating the reductions in CO2 emissions and in assessing the merits of the various energy scenarios. Coal Gasification Combined Cycle (IGCC) Process A number of advanced techniques for utilising coal have been researched over the years, the most promising of these is the coal gasification process, in which the coal is gasified in a fluidised bed reactor and used to drive gas turbines connected directly to generators. The hot gas from the turbines is then used as the energy source for a secondary steam system (Figure 4). The combined gas/steam process is termed an integrated coal gasification combined-cycle (IGCC) process.
Figure 4 – Schematic of the IGCC process A major technical problem with the IGCC process is the elimination of airborne ash particles in the coal gas, which ‘sand blast’ the gas turbine blades and cause high erosion rates. Direct filtration methods to clean the gas prior to injection into the turbine and surface hardening of the gas turbine blades have proved unsuccessful. Recent developments in which the gas is chilled prior to filtration have proved more successful, but the trade-off is a reduction in the overall efficiency of the IGCC process to that similar to conventional power stations. The minimum variance coal quality control strategy described in [7] would be beneficial in reducing the entrained ash content of the coal gas and, in turn, reducing turbine blade damage and wear. NATURAL GAS Natural gas has a lower carbon and higher hydrogen content, and is more combustible and less polluting as a fuel for driving gas turbine-generator units. Very high efficiencies are achieved, particularly in cogeneration plants designed to utilise the waste heat for ancillary purposes. As shown by the following scenario analyses, Australia’s considerable natural gas reserves make it a practical option for reducing our greenhouse gas emissions in the medium term. However, there are potential hazards in transporting natural gas through pipelines over long distances and an environmental penalty in constructing a national pipeline network. RENEWABLE ENERGY SOURCES Solar Energy Australia’s abundant solar energy can be exploited either as a concentrated energy source or as a distributed energy source for the generation of electrical power. In the former case, the sun’s rays are focused to a central point consisting of one or more boiler tube(s) and the steam generated is converted into electrical energy in the normal manner. In the latter case, a bank of photovoltaic solar cells are mounted on the roof of a household, and the electricity generated is utilised by the household. Any excess is fed into the power grid. Solar Thermal Electric Power Station (STEPS) Project Following the oil crisis in 1973, an investigation on the use of solar energy as a concentrated energy source for power generation was carried out in 1980-81 under a joint Australia-Japan Solar Thermal Electric Power Station (STEPS) Project, in which 10 MWe solar power stations were to be built at five locations in the Northern Territory (Alice Springs, Darwin, Katherine, Rum Jungle and Tennant Creek), which was heavily dependent on diesel-electric power generation. The escalating cost of diesel fuel in the late 1970s led to a corresponding increase in Commonwealth subsidies, and the principal aim of the project was determine whether the 1 MWe prototype solar thermal electric power stations being built at Nio, Japan, were cost-effective alternatives for the generation of electricity. Two solar power station designs were considered: a central tower design in which a series of mirrors located on the circumference of a circle around the tower, reflected the sun’s rays on to boiler tubes at the top of the tower; and a plane parabolic design in which the sun’s rays were reflected on to a tube at the focus of a series of parabolic mirrors located along the length of the tube. In both designs, the steam generated in the boiler tube(s) was used to drive a conventional turbine-generator. A major design problem that had to be overcome was the variation in heat flux/energy on the surfaces of the boiler tube(s) during cloud cover. A molten salt thermal storage system was built into the design to enable the solar power station to be fully operational at night and during cloud cover. However, the high cost of this auxiliary thermal storage system made the solar power station uneconomic even by comparison with diesel power generation. The STEPS project demonstrated conclusively that ‘conventional’ solar thermal electric power stations are not a viable alternative either as a primary or secondary source of electricity. Household Solar Power Generation Solar energy has been exploited as a distributed source of energy for several decades, principally for heating purposes such as solar hot water systems. However, the electricity saved in heating a domestic hot water system is offset by the capital cost of the solar unit, which can take some 5–7 years to be recouped. In more recent times, improvements in the overall efficiency of solar cells has lead to renewed application of banks of solar cells for electricity generation (Figure 5). The household consumes the solar power generated, and any excess power is fed into the electricity grid. Conversely, when the electricity consumption is more than the solar power generated, power is fed from the grid to the household.
Figure 5 – Schematic for household solar power generation Advantages of this energy option on sunny days are:
Disadvantages of this energy option are:
The introduction of a national grid may compound the disadvantages unless integrated computer based network controls are implemented to optimise domestic and commercial load distribution. Wind Energy Efforts to harness the power of wind has had a long history. Wind powered the sailing ships of old and powers the yachts of today. Efficient utilisation of wind energy for electricity generation requires sophisticated high technology, and much of the research and development has concentrated on such areas as the ‘optimum’ aerodynamic design of the large propellers, maximising electric motor/generator efficiencies at low speeds, the design of low friction bearings, the control of electrical output under variable wind conditions, etc. Wind power generators are usually installed on windy coast lines, hills and mountain ranges, and one of their major disadvantages is the ‘visual’ pollution they pose to tranquil landscapes and seascapes. Also, like solar power generators, they generally require backup electrical power to bring the large propeller up to the wind speed. ‘Hot’ Rock Thermal Energy Australia’s geological strata contains numerous subterranean ‘hot’ granite sites which have been extensively mapped to gauge their potential as a source of energy. Many of the sites (e.g. the Hunter valley in NSW) are conveniently located near current coal deposits adjacent to existing thermal power stations, and research is currently under way to determine the viability of utilising these ‘hot’ rocks as an abundant source of steam for generating electricity. The concept is simple and straight forward in principle: high pressure water is forced down a borehole to the hot granite rock some kilometres below the surface, Figure 6, and flows through horizontal fractures created in the hot granite. The steam generated is collected in chambers and transported to the surface, where it is used to drive conventional steam turbine/generator units.
Figure 6 – Schematic of ‘hot’ rock steam generation for electricity production Research in the U.S. and Australia has concentrated on the development of techniques for establishing the ‘optimum’ geological conditions to generate and collect the steam produced by the hot rock. The orientation of the granite fractures is critical to the economic viability of a hot rock site. In the U.S., geological tests have found that the hot granite fractures vertically, and this forces the steam downwards, making collection technically difficult and the site uneconomic. In Australia, however, geological tests at various sites have shown that our granite fractures horizontally, and steam production and collection is more viable technically and economically. Other major problems that are likely to be encountered in the long-term are:
Hot rock thermal energy has the potential to become the major source of electricity generation in the future, but further research and development is needed before this renewable energy source becomes a commercial reality. Some 80% of Australia’s current generating capacity of 35,000 MWe, or 28,000 MWe, is produced by coal-fired power stations, and so one hot rock site producing 500 MW of electricity represents about 1.8% of installed capacity. NUCLEAR ENERGY Nuclear technology was one of the first high technology initiatives at the political level in the ‘euphoric scientific period’ after the Second World War. The Menzies Liberal Government was persuaded by reputable Australian scientists that Australia should follow the lead of other Western nations and exploit our uranium resources for ‘peaceful uses’ to produce cheap electrical power. The Australian Atomic Energy Commission (AAEC) was founded in April 1953 by Act of Parliament, and in the early 1960s, a large number of scientists were recruited from overseas (principally from the UKAEA). With a policy shift from gas cooled to water cooled reactor systems in the mid 1960s, teams of AAEC scientists were seconded to nuclear research establishments in England, Canada and the U.S.A. Australia’s nuclear technology program and, in turn, the AAEC’s Nuclear Power and Energy Program (NPE), moved into top gear in October 1969 when Prime Minister Gorton announced that a lead 500 MWe nuclear power station would be built on Commonwealth land at Murray’s beach near the naval facility at Jervis Bay. By June 1970, fourteen tenders were received from seven nuclear organisations in Britain, Canada, West Germany and the U.S.A. Detailed technical assessment on the short-listed tenders was completed in early 1971. However, during this period, the AAEC and the Jervis Bay Reactor Project (JBRP) came under siege from a stridently militant anti-nuclear lobby backed by a sympathetic media, and nuclear technology soon became unclear technology in the public image both nationally and internationally. In March 1971, John Gorton resigned as Prime Minister and was replaced by (Sir) William McMahon, who cancelled the JBRP on ‘economic’ grounds. By default, Australia’s national energy policy at the political level has, since then, been based on our vast coal reserves, even though it was acknowledged by many scientists at the time that this more politically expedient policy option would have a detrimental impact on the environment in 25–30 years time (the 1990s). Unlike the U.S., European Union, Japan and other developed nations who have actively pursued the nuclear power option, Australia has effectively ‘painted itself into a corner’ by rejecting this option politically some 25 years ago. While there is a community tolerance towards nuclear technology for medical, industrial and environmental applications, nuclear power generation is unlikely to be high on the political agenda in the foreseeable future because of an entrenched community opposition to, and fear of, nuclear radioactivity. As a consequence, much of the nuclear power expertise built up as a national resource in the 1960s has been lost, and this expertise will have to be out-sourced to international nuclear technology vendors through international exchange agreements. The growth in uranium exports is the only benefit Australia gains from the nuclear option for the foreseeable future. Our capability to produce ‘value added’ high-grade uranium was ‘lost’ with the closure of the AAEC centrifuge enrichment program by the Hawke Labour Government in 1984, and once again, we have become a quarry to the rest of the world in this resource sector as well.
SUSTAINABLE ENERGY SCENARIO ANALYSISAUSTRALIA’S GREENHOUSE GAS EMISSIONS Based on the source references listed in reference [1], the reduction in projected energy sector CO2 emissions on a ‘business as usual’ (BAU) basis to return to 1990 levels is given by the black line labelled ‘1990’ in Figure 7, which shows that sector emissions would have to be reduced by some 36% to return to 1990 levels by 2010. The measures announced by the Prime Minister outlined in the previous section, are expected to reduce Australia’s total BAU emissions by 18% in 2010, which leaves the energy sector some 18% above 1990 levels on a pro rata basis, as shown by the line labelled ‘Australia’ in Figure 7. (We note that the Federal Government declined to reveal the actual emissions target Australia would be negotiating in the Kyoto talks.) The target reduction in CO2 emissions of 8% above 1990 levels by 2010 negotiated in Kyoto is shown by the green line labelled ‘Kyoto’, and equates to a pro rata reduction in the projected BAU emissions of 28% for the energy sector to achieve the Kyoto target by 2010, and a 38% reduction in 2020.
Figure 7 – Projected CO2 emissions and target percentage reductions ALTERNATIVE ENERGY TECHNOLOGIES The relative reductions in CO2 emissions of the energy technologies analysed in the previous report are reassessed as previously. The overall efficiencies and CO2 emissions of the energy technologies are assumed to be the same as previously, and are reproduced for convenience in Table 1 for both black and brown coal as pulverised fuels. Note that the conversion efficiencies are dependent on the heating value (HV) of the fuel employed, and the respective upper and lower limits for fuels with low (LHV) and high (HHV) heating values are as shown. The process CO2 emissions (in kg/MWh of electricity sent out) demonstrate that significant reductions are achievable with both black and brown coal gasification plants relative to their respective conventional (coal–fired) plants. Natural gas is the most efficient fuel due to its higher hydrogen content and lower carbon content.
Table 1 - Efficiencies and CO2 emissions for alternative technologies ENERGY SCENARIO ANALYSIS AND CRITERIA The projected CO2 emission reductions is again calculated using the intuitive power law model developed previously for various energy scenarios comprising of a mix of technologies. The CO2 emission reductions with and without renewable energy are calculated using the equations (A9) and (A10), Appendix A: with
renewable energy: without
renewable energy: Nuclear and Hot Rock Energy In the last term of equations (1) above, the nuclear/hot rock component has been replaced by emission reduction contributions from land use and forestry (revegetation/ reforestation) reforms. Nuclear energy is unlikely to contribute materially to the reduction Australia’s greenhouse gas emissions in the timeframe under consideration for the reasons given above. If hot rock energy sites can be brought on stream before 2020, then this becomes an additional energy option for augmenting the other renewable energy options. However, the current energy scenario analysis aims to investigate the merits of renewable energy and land use/forestry reforms which, post Kyoto, has been given a higher priority by the Federal Government. Environmental Sustainability Criteria and Energy Scenarios As previously, the energy scenarios will combine a mix of alternative ‘clean energy’ and renewable energy technologies, and will be assessed by their ability to achieve the emission targets and timelines shown in Figure 7 using the modified environmental ‘sustainability’ criteria in order of priority as follows:
The following energy scenarios are reassessed using these sustainability criteria:
Each scenario plot presented in Figures 8–10 includes the values of the power law parameters for each energy technology in the format tabulated below:
that is, the first row gives the proportional rate coefficients, the second row the power law exponents and the columns 1–4 are the energy technologies in the order shown. ENERGY SCENARIO ANALYSES Coal Gasification Energy Scenario (Figure 8) This scenario aims to limit the decline in coal utilisation. The coal gasification capacity is installed at a uniform rate (power law exponent p = 1) to produce the target reduction in CO2 emissions by 2010. Key results for this energy scenario are summarised as follows: Coal-fired
energy augmentation (Figure 8a):
The reductions in CO2 emissions reaches the target of 28% by 2010 but plateaus at 34% in 2020. The reduction in
coal-fired generation capacity (34%
in 2010 Natural gas energy augmentation (Figure 8b): The natural gas rate parameter is set at 25% of the coal gasification parameter and adjusted to yield the target reductions in CO2 emissions. The resulting natural gas augmentation of 6% of installed capacity by 2010 rising to 11% by 2020 yields a sustainable energy scenario, and this produces a corresponding decrease in domestic coal consumption over this period. Renewable Energy/Reforestation Augmentation with Coal Gas Backup (Figure 8c): Solar/wind energy is introduced at a uniform rate to 10% of installed capacity by 2020 and revegetation/reforestation at a retarded rate of 4% in 2010 rising to 6% in 2020. The decrease in coal consumption is about half that for the previous case with natural gas augmentation for the same reduction in CO2 emissions. It satisfies all criteria, and is a sustainable energy scenario.
a) Coal-fired energy augmentation
b) Natural gas energy augmentation
c) Renewable energy/reforestation augmentation with coal gas backup Figure 8 – Coal gasification energy scenarioThe main conclusions to be drawn from this energy scenario are:
Natural Gas Energy Scenario (Figure 9) In this scenario, the natural gas capacity is installed at an accelerated rate (power law exponent q < 1) in order to achieve the target reductions in CO2 emissions. Key results for this scenario are summarised as follows: Coal-fired Energy Augmentation (Figure 9a): This is a viable energy scenario provided the high dependence on natural gas (30% of installed capacity by 2020) is sustainable in the long term. The downside is the corresponding reduction in coal-fired generation capacity, and hence domestic coal consumption of 21% in 2010 rising to 30% in 2020. Coal
Gasification Augmentation (Figure 9b):
Coal gasification is installed at a rate of 25% of natural gas capacity to limit the decline in domestic coal
consumption (18% in 2010 Renewable Energy/Reforestation Augmentation with Natural Gas Backup (Figure 9c): Solar/wind energy is installed at a uniform rate to give 10% of installed capacity by 2020. The land use/forests (labelled ‘Forests’) rate parameter is 25% of the natural gas rate and with the same exponent. The differential between the solar/no solar CO2 emission reduction trajectories is smaller than with coal gasification (Figure 8c) due to the higher efficiency of the natural gas backup. There is a marginal increase in natural gas capacity/resources (1% in 2020) required for solar/wind backup, and a marginal decrease in domestic coal consumption (1% in 2020) compared with the previous (coal gasification augmentation/backup) case.
a) Coal-fired energy augmentation
b) Coal gasification augmentation
c) Renewable energy/reforestation augmentation with natural gas backup Figure 9 – Natural gas energy scenario The main conclusions to be drawn from this scenario analysis are that:
Renewable Energy Scenario (Figure 10) This scenario aims to exploit our renewable energy resources to their full potential, and the model parameters are evaluated as follows:
Key results for each case of this scenario are summarised as follows: Conventional
Energy Augmentation and Backup (Figure 10a): The reduction in coal-fired generation is matched by the
revegetation/reforestation rates as a result of constraint (2) above, and
yields a decline in coal consumption of 13%
in 2010 Coal
Gasification Augmentation and Backup (Figure 10b): The reduction in coal-fired generation due to
revegetation/reforestation is offset by the coal gasification capacity, which
reduces the fall in coal utilisation (7%
in 2010 Natural
Gas Augmentation and Backup (Figure 10c):
This is the highest order energy scenario for controlling the CO2
emissions produced from power generation. However, the relatively high natural
gas capacity (18% in 2020) may not
be sustainable indefinitely due to resource limitations, and may need to be augmented
by higher gains in renewable energy/reforestation and/or the introduction of
higher order renewable (hot rock)/nuclear technologies beyond 2020. This
scenario gives tighter control over the differential reduction in CO2
emissions with and without solar/wind energy (5% in 2020). There is a greater decline
in coal consumption (18% in 2010
a) Conventional energy augmentation and backup
b) Coal gasification augmentation and backup
c) Natural gas augmentation and backup Figure 10 – Renewable energy scenario The main conclusions to be drawn from these renewable energy scenarios are:
BACKA ‘MINIMALIST’ ENERGY SCENARIOAustralia has a unique opportunity post Kyoto to put in place an energy policy which provides a springboard for creating a sustainable energy future. One outcome of this energy policy will be an ‘optimum’ energy scenario in which competing interests (constraints) are balanced by national priorities. However, defining what our national priorities are, or should be, has been brought into question in the debates leading up to the Kyoto talks. The opposing camps comprised:
Both viewpoints are truisms in their own right. Obviously, as history clearly attests, unfettered economic development which irreparably ravages the environment is a recipe for national disaster in the long term. Conversely, a prohibition on economic development in order to preserve the environment in a pristine state is also a recipe for national disaster in the short term. In our previous report [1], we noted that the economic and environmental constraints impacting on our national development will inevitably require complex environmental and econometric models to predict the consequences of Government policies and business/industry sector activities. These economic and environmental constraints may be expressed in mathematical terms by the general equations: National Emission Reduction: Cost to the National Economy: which are optimised with respect to any unknown parameters and/or weighting factors subject to an equal number of (time dependent) economic and environmental targets. The econometric models developed by ABARE (the Australian Bureau of Agriculture and Resource Economics) do not include the benefits (Bm) and penalty (Pp) terms of equation (3), and consequently overestimate the economic costs associated with greenhouse abatement measures. The inherent bias of ABARE’s econometric models, and in turn their policy advice to Government, was investigated by the Commonwealth Ombudsman, who found that ABARE had not allowed an adequate and balanced community input into its climate change research, and had, as a result, compromised the credibility of its research [8]. This finding raises a whole raft of questions regarding the commercialisation of research, particularly when it impacts on Government policy, and it is not surprising that the Ombudsman’s finding was rejected by ABARE and the Federal Government. On the basis of our empirical analysis of sustainable energy scenarios, we postulate a ‘minimal’ energy scenario with the following priorities based on the Prime Minister’s statement to Federal Parliament [2]:
We note that the target reductions in Australia’s greenhouse gas emissions announced Prime Minister excluded land use change, but this component was subsequently included in the Kyoto Protocol for calculating the Protocol target for Australia [10]. This ‘minimalist’ energy scenario is shown in Figure 11, and is very similar to the coal gasification/natural gas scenario given in Figure 8b.
Figure 11 – A ‘minimalist’ energy scenario based on coal gasification augmentation/backup Some observations in relation to the stated objectives are:
In conclusion, the postulated ‘minimalist’ energy scenario, when compared with the ‘greener’ renewable energy scenario given in Figure 10, is deemed to be a minimalist response to global warming because of the primary priority given to preserving our coal industry and the economic weighting given to the costs of greenhouse abatement measures. However, there is scope for ‘fine tuning’ this energy scenario using higher levels of natural gas capacity as required to augment any medium term shortfalls in the component contributions to national greenhouse emission reductions.
ECOLOGICAL TAX REFORMHitherto, the Federal Government has relied on its Greenhouse Challenge program to encourage greater compliance from industry under its National Greenhouse Strategy. In his statement to Federal Parliament, the Prime Minister indicated the Government is “prepared to ask industry to do more than they may otherwise be prepared to do, that is, to go beyond a ‘no regrets’, minimal cost approach where this is sensible in order to achieve effective and meaningful outcomes” [2]. While industry as a whole in beginning to accept its responsibility for reducing its greenhouse gas emissions in conformity with Government and international emission targets, there will invariably be some recalcitrant industries who will defer implementing greenhouse abatement measures due to cost pressures arising from, for example, a decline in sales revenue due to the ‘Asia crisis’. Of the raft of measures that have been proposed for dealing with recalcitrant industries and, in the global context, countries who fail to comply with accepted environmental standards, the most popular has been the imposition of a carbon tax on the greenhouse gas emissions produced by a company or industry. Of these, perhaps the most comprehensive has been the ‘ecological tax reform’ put forward by the Australia Institute [11], which proposed a uniform carbon tax of $23 per tonne of CO2 emissions. In our previous report [1], this proposal was modified to a variable (IET) penalty–incentive carbon tax rate which was dependent on the degree of compliance with target green-house gas emissions. The decline in electricity industry tax revenue over time for the ‘minimal’ energy scenario (Figure 11) is shown in Figure 12. The ETR revenue is based on a constant carbon tax rate of $23/tonne of CO2 emissions, whereas the IET incentive revenue is based on an average carbon tax rate of about $12/tonne of CO2 emissions with a 70% electricity industry compliance in reducing their CO2 emissions by 28% in 2010.
Figure 12 – Decline in electricity industry tax revenues for the ‘minimalist’ energy scenario SUMMARY AND CONCLUSIONS The coal gasification, natural gas and renewable (solar/wind) energy plus land revegetation/reforestation capacities for the coal gasification, natural gas, renewable energy and ‘minimalist’ energy scenarios in 2010/2020 are summarised in Table 2, together with the decline in domestic coal consumption over the same period. The sustainability of the various energy scenarios is summarised in Table 3, which assesses their ability to meet the 2010/2020 target reductions in CO2 emissions according to the following ratings:
From Tables 2 and 3, the technical conclusions that can be drawn from this analysis of the alternative energy technologies are:
Table 2 – Augmentation/backup capacities and decline in coal consumption for the various energy scenarios
Table 3 – Evaluation of energy scenario analyses
KEY FINDINGS AND CONCLUSIONSCLIMATE CHANGE AND ENERGY POLICY Australia has a range of sustainable energy options for complying with the Kyoto Protocol target of 8% increase in greenhouse gas emissions above 1990 levels. Australia’s reduction in greenhouse gas emissions as a signatory to the Kyoto Protocol requires a gradual shift in energy policy from a fossil fuel based economy to a natural gas/renewable (solar/wind) energy based economy in the medium term, and possibly a renewable (hot rock/tidal)/nuclear energy based economy in the longer term. Our analysis shows, however, that a review of current energy policy aimed at more effective exploitation of our vast renewable energy/natural uranium resources in the national interest is required in the interim. ENERGY SCENARIO ANALYSES The conclusions that can be drawn from the energy scenario analyses based on a 8% increase in greenhouse gas emissions above 1990 levels are:
In addition to the above energy options, we make the following comments regarding hot rock and nuclear energy options based on our previous evaluations [1]: Hot rock renewable energy has the potential to be the greatest energy resource on which to build a sustainable energy future provided the available sites can be exploited commercially and managed successfully. Nuclear energy will require a long lead time to re-establish the necessary nuclear safety and environmental management infrastructure for implementation, and therefore is inappropriate as a ‘base load’ energy augmentation technology in the immediate term. However, it IS a sustainable energy source beyond 2010/2020, and as noted previously [1], it is paramount that Australia exploits its extensive natural uranium deposits as a value-added resource in the national interest rather than simply exporting its uranium as ‘yellowcake’ for the economic benefit of other competitive nations. Adoption of ‘higher order’, energy intensive hot rock/nuclear technologies are likely to be cost-prohibitive in the medium term, but will become more economical when phased in over the longer term, and warrants serious consideration. ECONOMETRIC MODELS We note that the Commonwealth Ombudsman has found that the credibility of ABARE’s greenhouse research and, in turn, the forecasts of their econometric models, has been compromised by its funding from ‘vested corporate interests’ [8]. This confirms our view that ABARE’s econometric models do not provide a general, realistic and representative platform on which to base a national policy on climate change for the reasons given above and in reference [1]. TAXING GREENHOUSE GAS EMISSIONS Our analysis shows that the revenue earned from a carbon tax under ecological tax reforms proposed by the Australia Institute [11] and in our previous report [1], decreases rapidly as greenhouse gas emissions are reduced (Figure 12), and does not constitute a reliable substitute for other taxes (e.g. payroll tax) in the long-term. There has been considerable debate on the merits of a carbon tax on greenhouse gas emissions. Critics, which include the present Federal Government and many tax experts, claim that most studies on the impact of carbon taxes indicate they produce net welfare losses of more than 2% of GDP, that it will not prevent the greenhouse effect from occurring if invoked unilaterally, and that, in the meantime, “we should start adapting to a generally warmer, and sometimes wetter, world” [12]. These arguments are based on Australia’s very small contribution to global warming (1.4%), a myopic economic focus, voluntary ‘no regrets’ policy measures, and a diversional tactic that dealing with the pollution levels of developing countries such as China and India should take priority over Australia’s responsibilities under any international convention on global warming. Such criticism fails to acknowledge that, although our percentage contribution to global warming is small, it is the highest contribution of any country on a per capita basis due to our fossil fuel based energy policies over the past three decades, and therefore:
In comparison to a uniform carbon tax proposed by the Australia Institute [11], the penalty–incentive carbon tax proposed in our previous report [1] is designed to provide:
Mechanisms for establishing differentiated CO2 emission targets for individual companies, industry sectors and the States for taxation purposes will depend on the implementation of measurement and auditing procedures for monitoring the CO2 emissions produced and the establishment of tradeable emission credits, co-operative contracts or other economic instruments for phasing in the ecological tax. CONCLUSIONS Australia has won a valuable reprieve in Kyoto, and in signing the Kyoto Protocol, we are committed to reducing our greenhouse gas emissions on a ‘business as usual’ basis by some 28% in 2010 in order to achieve the Protocol target of 8% above 1990 levels by 2008–2012. A range of coal gasification, natural gas and renewable energy scenarios are assessed against a revised ‘sustainability criteria’ based on the new targets. Our analysis indicates that a ‘minimalist’ energy scenario based on the greenhouse abatement measures/priorities announced by the Prime Minister, relies heavily on coal gasification augmentation of coal-fired generation to limit the decline in domestic coal consumption, coupled with some natural gas, renewable (solar/wind) energy and land revegetation/reforestation. It has the ability to achieve the Kyoto Protocol target reduction in CO2 emissions, and to provide an acceptable basis for a managed transition from a fossil fuel based economy to a natural gas/renewable energy economy in the medium to long term (2010–2020). Our analysis shows, however, that a review of current energy policy aimed at more effective exploitation of our vast natural energy resources in the national interest is required to secure a sustainable energy future in the longer term. It is envisaged that such a review should include greater exploitation of our renewable energy resources, such as the commercial development of suitable hot rock and tidal sites for electricity generation, as well as the scope for re-establishing a nuclear power program and the associated infrastructure for more effective exploitation of our vast natural uranium resources. In the context of global warming, these renewable/nuclear technologies have the potential to yield the greatest economic and environmental benefits for Australia rather than simply exported overseas. Therein lies the true Greenhouse Challenge for Australian industry. ACKNOWLEDGEMENTThe author gratefully acknowledges helpful discussions with Mr Fred Rollo, Principal, Rollo & Company (Consulting Taxation Economists) and Director of Finance, Redevelop Australia Consortium. REFERENCES
APPENDIX – GREENHOUSE GAS EMISSION MODELSREDUCTION IN GREENHOUSE GAS EMISSIONS The total reduction in greenhouse gas emissions is given by:
where CFG = base load coal-fired generation fraction CGG = base load coal gasification generation fraction NGG = base load natural gas generation fraction RG = base load renewable energy generation fraction LUF = increase in sink land use and forestry fraction and the constants a = CO2 reduction due to
reduction in coal generation b = CO2 reduction due to coal gasification generation c = CO2 reduction due to natural gas generation d = CO2 reduction due to renewable energy generation (= 1) e = CO2 reduction due to land use and forestry (= 1) Installed Capacities The total fractional installed capacity, and is given by:
where the renewable energy is replaced by the backup capacities:
Alternative Energy Power Law Relationships We assume the following power law relationships:
where the independent variable Y = normalised year = (year – 1998)/100. Similarly, using the renewable energy as the independent variable, the backup capacities are given by:
Hence, equation (A2) becomes:
where the total coal gasification fraction is:
and the total natural gas fraction is:
Emission Reduction With Renewable Energy (No Backup) From equation (A1), the CO2
emission reduction without backup (100% renewable energy;
where Emission Reduction Without Renewable Energy (With Backup) From equation (A1), the CO2 emission reduction with no renewable energy available (100% backup) is:
where | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5% in 2020 for the coal gasification
energy scenario with renewable energy augmentation/coal gas backup, to a high
of 20% in 2010
) is:
and 
.
and CFGT is given by equation
(A6).