An oily red herring

The government’s decision to effectively exempt petrol for 3 years from the Emissions Trading System was criticised from several angles – by the Greens as being anti-environment, and by the Liberals, who claim that the government copied their policy. Much of the ideologically pure left blogosphere condemned the decision as political opportunism. More sensibly, Tim has wisely pointed out that to have done otherwise would have condemned the policy to death in the senate.

Despite all the fuss, I agree with Tim that we are missing the point. The reason for establishing an ETS is to provide a price signal for consumers to reduce their carbon emissions. It is hard to imagine a bigger price signal than a seven-fold increase in the price of a barrel of oil since the 1990’s. Adding the price of carbon to the current record pump prices would have an almost laughably small effect of about 4.5c per litre (assuming the government’s reference case of $20/tonne). If the message that we have to reduce our fuel consumption is not getting through already, a few percent extra will make little difference.

Furthermore, the signs are growing that the current high prices are not a temporary situation. The CSIRO recently warned about the possibility of $8/litre petrol. Even the normally optimistic International Energy Agency has predicted that the oil market will remain tight until at least 2013.

That’s market fundamentals. But what about the fundamentalists? Threatening noises from Iran and Israel are also keeping traders wary and prices high. With the next US election looking tight, it must be tempting for Bush to pull a war out of his big Texan hat and save the day for his party. There’s nothing like a good war to scare people away from the Democrats. Nobody would want that totally inexperienced Muslim guy, Barak Osama, holding the reigns if the situation with Iran deteriorates. But surely a US president wouldn’t manufacture a war for political gain, would he?

But I digress. Our obsession with petrol is irrelevant for another reason. That reason is coal. James Hansen, head of the NASA Goddard Institute and one of the most prominent scientific voices for climate change mitigation, points out that coal is king when it comes to the transformation of our climate. He wrote an open letter to our PM in April that makes for some interesting reading. He points out that burning all of the world’s known reserves of oil and gas would take us close to the realm of dangerous climate effects; burning all of our known coal reserves, on the other hand would:

“produce a vastly different planet, a more dangerous and desolate planet, from the one on which civilization developed, a planet without Arctic sea ice, with crumbling ice sheets that ensure sea level catastrophes for our children and grandchildren, with shifting climate zones that cause great hardship for the world’s poor and drive countless species to extinction, and with intensified hydrologic extremes that cause increased drought and wildfires but also stronger rain, floods, and storms.”

This stark vision makes Garnaut’s supposedly alarmist views sound like utopia. Hansen’s main recommendation is for Australia to take a leadership role by phasing out coal use that does not capture and store CO2. Green campaigners who oppose carbon capture and sequestration on the grounds that it “might not work” should take note. It simply must work, and fast.

The discussion about and ETS for petrol is a distraction. Petrol is already expensive, and coal is the main problem anyway. It’s great to see these issues being debated in the main stream, but we should be careful not to be distracted by those oily red herrings.


2 Responses to “An oily red herring”

  1. The Continuing Climate Change CPRS Clash : Tree of Knowledge Says:

    […] as Brett writes at Everything is Changing “The reason for establishing an ETS is to provide a price signal for consumers to reduce […]

  2. Responsible economic policy, political compromise, or a victory for big business? « Everything is changing Says:

    […] petrol from the ETS in the short term by providing a cent-for-cent reduction in the petrol excise. As I have said before, this will make little difference as there is already a significant price signal from the current […]

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