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Climate Change and the Economy: Australia’s Threats and Opportunities Ben McNeil University of NSW

Climate Change and the Economy: Australia’s Threats and Opportunities Ben McNeil University of NSW. Extreme Greenhouse Effect. The Importance of Greenhouse Gases. Predict the temperature on Venus?. 470 ° C. 15 ° C. -63 ° C. 167 ° C. Climate Change is Beyond the Science!. 2008. 2007.

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Climate Change and the Economy: Australia’s Threats and Opportunities Ben McNeil University of NSW

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  1. Climate Change and the Economy:Australia’s Threats and OpportunitiesBen McNeilUniversity of NSW

  2. Extreme Greenhouse Effect The Importance of Greenhouse Gases Predict the temperature on Venus? 470°C 15°C -63°C 167°C

  3. Climate Change is Beyond the Science! 2008 2007 Stroeve et al. GRL 2007

  4. Climate Change is Beyond Polar Bears!

  5. Climate Change is about the economy. Climate Change, Cutting Carbon Emissions… Economic Growth, Jobs…

  6. The Myth of Climate/Carbon Versus the Economy • Australia’s Economy is Climate-sensitive (Garnaut) • Australia’s biggest export has the highest carbon exposure to the world • Carbon obesity will shut out low carbon foreign investment • Protecting Australia’s high carbon economy shuts out the fastest growing area for new export wealth and opportunity - clean technology

  7. Australia’s Economic Threats and Opportunites :1) Climate Sensitivity

  8. Direct Economic Impact • Civilization was geographically built on relatively stable climate patterns - a changing climate will reorganize human settlements and where civilization can live. • Extreme Events, Water Security, Droughts, Tourism (Great Barrier Reef and Kakadu), Sea-level rise, infrastructure and real estate damages, agricultural productivity …. • Ross Garnaut ~5-7% of Australian GDP by end of century, indirect costs?? • Australia is one of the most economically vulnerable to climate change

  9. Australia’s Climate Sensitivity IPCC, 2007

  10. Australia’s Economic Threats and Opportunities :2) Low Carbon Energy Trade

  11. The Inevitable Clean Industrial Revolution New Clean Industrial Revolution Old Industrial Revolution Global Economic Growth Global Greenhouse Emissions 1800 Today 2050

  12. Why is a future low carbon economy inevitable? • Oil - Finite and Costly • Energy Nationalism (particularly in the US) • Climate Change • China Diversification from Coal • Energy Efficiency Any indicators that the shift is on? • In 2008 Global Investment in Clean technology 30% Higher than Fossil Fuels (UNEP,2009) • Shadow Price of Carbon Already in Place in Developed World (TXU, Australian investment 98% gas/renewable) • Many regional examples: eg. Ontario example of phasing out 14 coal-fired power stations, China $200 billion in clean-tech, UAE $500m clean tech and Masdar city….

  13. Australian Energy Trade in a Low-Carbon World? • The Future of Australian Coal : Adapt or Die? Coal $25billion

  14. Australia’s Economic Threats and Opportunities :3) Low Carbon Foreign Investment

  15. Australia is Coal Addicted for Energy Installed capacity by fuel type - 2000 Source: Electricity Australia 2001, ESAA

  16. Australian Economy is Carbon Obese Higher carbon exposure from global low carbon trade shifts Carbon Intensity of Economy

  17. Example: Would Google invest in Australia? • Data centers ($500m, employing hundreds) • Extremely Energy-Intensive long lived assets

  18. Google is going Carbon Neutral • Google have self-imposed a carbon price for their investments • REASONING: A ‘shadow carbon price’ “will enable us to calculate a more accurate cost of power as one of the key criteria in site selection for our data centers. The cost of carbon is not yet recognized by the U.S. market, but may soon become so through legislation. Pricing carbon is an important tool to reducing the financial risk that our energy investments face.” • Last two data-centers were positioned along the Columbia River for access to low carbon stable energy • That leaves Australia’s high carbon grid exposed

  19. Australia’s Economic Threats and Opportunities :4) Clean Technology Export Opportunites

  20. The Clean Technology and Jobs Revolution Global Needs for a Low-carbon Economy • Low carbon materials/plastics/carbon fibre, low carbon steel • Biofuels, waste recycling, efficient home design, • Clean energy (biomass, geothermal, wind, solar thermal) • Energy storage technology, advanced battery technology • Infrastructure for low carbon economy (rail, roads, gas networks, transmission grids..) • Water purification technology, energy efficiency/automated systems/IT software/carbon financial markets……

  21. One example: Oil-free Transport Network and Job Potential Electric Vehicles Production and manufacturing of car itself, battery technology, the smart energy grid, building exchange stations and use =10000’s of new green jobs

  22. Economic Opportunity in the Clean Industrial Revolution • 600 billion tonnes of carbon avoided until 2050 (limit 2degC) • $25/tonne = $15trillion opportunity (~$375 billion/year) • $40/tonne = $24trillion opportunity (~$600 billion /year) Optimistic Case Pessimistic Case • 100 billion tonnes of carbon avoided until 2050 • $25/tonne = $2.5trillion opportunity (~$60 billion/year) • $40/tonne = $4trillion opportunity (~$100 trillion /year)

  23. How Should Australia Respond to the Inevitable Global Low Carbon Economy • Clean Energy Targets to spur private investment • Upscale in Public R&D • Government incentives for local clean technology innovation and manufacturing • A meaningful carbon price to boost low carbon private innovation At least 1% of GDP (~$10billion) annually into low carbon/clean R&D/ infrastructure How?

  24. Isn’t a carbon price going to hurt industry?

  25. Early Carbon Price = Economic Advantage $3.3 /gallon • Japanese government fuel efficiency standards and R&D led to competitive advantage $3.0 /gallon $2.0 /gallon $1.4 /gallon

  26. Conclusion: Big economic danger in locking in high-carbon interests ** Australia is Climate Sensitive and Carbon Intensive which means we must be a global leader in decarbonising our economy to ensure the immense opportunities and job creation are created locally

  27. The Need for A Meaningful Carbon Price Clean Technology Investment? The Accidental Environmentalist It will boost the level of clean technology private capital investment

  28. Historical Nuclear Costs in the USA UMPNER Review Costs • ~Analysis of 100 Nuclear Power Reactors in the US Levelised Electricity Costs in 2004 (US$/MWh) Koomey and Hultman, 2007

  29. Summary of Nuclear Costs • Overseas historical experience suggests the first fleet of nuclear reactors to be at least $90-100/MWh • Irrespective of these costs a liberalised energy market in a western democracy face huge hurdles for nuclear power: • construction cost blowouts and delays • cumbersome regulations • accident liability • long time for investor returns • Non-existent skills/industrial base • NIMBY • new terrorist threat • water-use and coastal site constraints • ultimately a high risk premium for investors • The only way nuclear power could potentially be introduced into the Australian energy market would be : • Government imposing a Mandatory Nuclear Energy Target (MNET) • Government underwriting of loans/accident/terrorist/waste liabilities • Overcome EXTREME NIMBY

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