A Proper Assessment of the Paris Agreement

During my career in the Electricity Industry, Australia had some of the lowest electricity prices in the world. In Queensland for many years, under the guidance of Electricity Commissioner Neil Galway, we had the challenging target of keeping increases in electricity charges to less than half of CPI increases. As a result for many years, in real terms, electricity prices were continually falling.

But in recent years that has all changed. Not only have Australia’s electricity prices risen dramatically so that we now have some of the highest cost electricity, but our reliability of supply has reduced making the likelihood of blackouts far more likely.

What is the cause of this alarming change to our electricity supply system? It has been the undue haste to install renewable generation.

Now this is bound to be a controversial essay, so I need to carefully outline my position on the subject.

To begin with let me assure you I am a proponent of renewable energy. When I was CEO of Stanwell Corporation we made an early commitment to pursue renewable energy projects.

I must confess also that we actively lobbied government to establish a renewable energy target. But the target we lobbied for which was eventually legislated by the Federal Government was a modest 2%.

We envisaged a transition to renewables from fossil fired generators occurring over many decades. The transition that we had in mind was that the reduction in carbon intensity of electricity generation in the early phases would involve higher levels of gas generation. Gas generation reduces carbon emissions compared to coal fired generation  but has the advantage ( like coal fired generation but unlike renewable generation -except hydro generation) of being despatchable, hence helping secure system reliability. Unfortunately the gas component of the orderly transition has been curtailed by environmental activism which has successfully thwarted the exploitation of much of Australia’s abundant gas resources.

Along with this, the Greens, and subsequently the Labor Party, have continually championed excessive renewable energy targets that result in higher prices and less reliability of supply.

[In the recent Australian Competition and Consumer Commission report on the Australian electricity market demonstrated how well-intentioned climate change policies have hurt electricity consumers. For example when considering the proliferation of photovoltaic (PV) cell installations they concluded that the subsidies offered by state governments have pushed up prices for all energy users. They concluded that subsidies outweighed by many multiples the value of the PV energy. Unfortunately it is the relatively well-off that install PV arrays, and it is those not so well-off who bear most of the consequences.]

Why then would we want to take such measures that unduly burden electricity consumers and threaten the viability of energy intensive industry? Well it is because we are trying to save the world from the ravages of climate change.

There are still some reputable scientists who are ambivalent about climate change. They point out that the climate models predicting temperature increases relied upon for justifying such large scale and costly remediation efforts have largely been pessimistic and not validated by subsequent data.

We know the earth has been warming since the Little Ice Age which lasted from the 14th to the mid- 19th century. The temperature of the earth is affected by many influences only one of which is the Greenhouse Effect. (I have discussed this in previous essays so I won’t go into that again in this essay.) There is some suggestion that warming might have temporarily plateaued in the last decade. It is drawing a long bow to suggest that the primary influence on global warming is the Greenhouse Effect. It is even more dubious to claim with certainty that the warming mechanism is anthropocentric.

But just for the sake of argument let us assume that global warming is a fact, that it is caused by the Greenhouse Effect, and that it is a result of CO2 emissions caused by human activity.

If that is the case then what should we do about it?

We have a range of strategies available to us ranging from:

  • Mitigation, where we could attempt to reduce CO2 emissions and try to reverse the Greenhouse Effect, or
  • Adaptation, where we could accept that temperature rises are inevitable and put in place strategies to minimise any subsequent ill effects, or
  • We might choose to adopt both mitigation and adaptation strategies.

The problem with mitigation strategies is that it is almost impossible to do enough to make a perceptible difference. If we wish to prevent the temperature of the earth from rising by more than 20C it has been calculated that it would require the reduction of projected emissions for this century of 6,000 billion tonnes of CO2. The UN has calculated that if each nation was to meet its agreed reduction targets (including the US who has now with drawn from the Paris Agreement) this would result in a reduction of atmospheric CO2 by 2030 of only 60 billion tonnes. Consequently our efforts to reduce CO2 emissions of any consequence seemed doomed to failure.

On top of that, many countries who signed up the Paris Agreement (and the Kyoto Agreement before that) are unlikely to meet their commitments. It does not seem apparent that they were cognisant of the costs and the impact on their standards of living when they made their pledges, driven by virtue signalling more than any real understanding of the science and the economics of combatting the Greenhouse Effect. But one thing is clear – that the cost of mitigation strategies is high and the benefits likely to be meagre.

It is likely then that any mitigation efforts that might have a substantial effect are beyond us at this stage. This would suggest that a prudent response might be to concentrate more on adaptation but also to committing more resources to research particularly on renewable energy generation technologies and storage technologies.

Australia’s position is particularly parlous insofar as our emissions comprise only 1.3% of total emissions. Taking abatement action that is costly and with such minimal impact seems foolish in the extreme. Even Australia’s Chief Scientist, Alan Finkel, has agreed that any emission reduction strategies taken by Australia can have no discernible impact on global warming.

In addition, the dangers of global warming are usually overstated, at least in its early phases. The UN Intergovernmental Panel on Climate Change has estimated that the impacts in about half a century if there were no mitigating strategies in place would amount to a loss of between 0.2% and 2.0% of GDP. Bjorn Lomborg, President of the Copenhagen Consensus Centre, points out “this is similar to the effect of one recession over the next five decades – a problem, but by no means the end of the world.”

Proponents of abatement often highlight the costs to the world of global warming pointing to increased heatwaves, cooling costs and heat deaths. They neglect to balance the equation by highlighting the reduced cold, heating costs and the number of deaths attributed to cold (which are currently six times more than those caused by extreme heat).

In Australia the rising electricity prices, resulting from a too hasty move to renewables, is already having perverse effects. High electricity prices are forcing energy intensive industries to look at relocating overseas. When this happens not only are we exporting jobs but we are increasing the CO2 burden in the atmosphere. Many overseas countries have less efficient electricity generation than we do. So just shifting those industries doesn’t solve the problem because the Green House effect is maintained wherever the generation occurs.

The climate change alarmists tell us that there is no future for coal. They continue to tell us that countries like China and India are making significant investments in renewable energy technology. But renewable energy is still a minor component of the world’s electricity generation and according to the Climate Study Group there are “1370 coal-fired power units being planned or installed around the world.” In fact most of the recognised authorities on electricity generation confirm that coal will play a vital role for many decades to come.

So what to do?

I will try to summarise where I stand.

  1. I am in favour of renewable energy technologies and have no doubt that that is where the future lies. But our transition to renewable technologies must be a rational and measured one. As we can see from both our experience in Australia and the experience in Europe, an undue haste to install renewable generation has greatly increased the price of electricity and reduced reliability of supply.
  2. It is apparent that the earth is warming. But it is not warming at the rate that the climate alarmists have suggested. The earth has gone through heating and cooling cycles many times before. The current warming is consistent with the warming trend since the end of the Little Ice Age. We cannot be sure this is due to increasing levels of atmospheric CO2.
  3. Even if the warming is a result of increased levels of CO2, the mitigation strategies endorsed by the Paris Agreement, if fully implemented, are unlikely to make a significant change in the rate of warming.
  4. It is unlikely that many of the signatories to the Paris Agreement will meet their abatement targets.
  5. Australia contributes only 1.3% of CO2 emissions, and consequently any abatement initiatives we might take have little consequence in the scheme of things.

In light of all this, it seems to me to be futile to concern ourselves unduly with the undertakings of the Paris Agreement. Australia should proceed in a measured way to install renewable technologies but to give higher regard to the cost and reliability of electricity supply.

It is appropriate that we should support research into renewable generation and storage technologies which should ensure that a transition to renewable generation is affordable and can offer us renewable energy in a reliable and cost-effective manner.

If this means abandoning our commitment to the Paris Agreement, then so be it!


7 Replies to “A Proper Assessment of the Paris Agreement”

  1. A well measured response and considered observation. Australians need to understand the impact of CO2 on climate, but at the same time Australia as a country must also consider the destruction of its economic value from an uncoordinated response to climate change

  2. Ted:

    I’ve been reading your essays with interest for a couple of years, but never more so than with respect to your writings around Australian energy policy. I have some well formed opinions about this situation, and would love it if you could change them.

    I’m a very modest consumer of electricity. I’m a domestic user with a very small footprint who doesn’t run a foundry or a farm, so undoubtedly I’m not seeing how bad this problem is. This morning I saw a coal industry ad that featured either actors or operators explaining how their energy costs had exploded. I hadn’t realised the situation was this dire.

    However, I see the reality of today as the deal voters accepted 20 years ago when they installed governments whose position on global warming was that it’s either not happening or it’s not our problem.

    The yanks use that wonderful expression ‘kicking the can down the road’, which is what successive right wing governments have done for 2 decades. The current problem is not a problem of today, it’s a problem of 20 years ago. Had John Howard’s Government (for example) done more to position Australia for clean energy production, not only would we have a clean energy economy to proudly show the world, we’d also have been exporting clean energy technology and knowhow to the rest of the world for the last 20 years. Instead of leading the world into a non-polluting future (and people need to stop talking ‘climate change’ and start talking ‘pollution’ which is the real issue), Australia has been swimming against the currents of change – avoiding opportunities that other countries will use to leapfrog us – by defending the need for the economy to continue mining, manufacturing, selling and burning fossil fuels.

    I understand that technology does not yet exist to supply clean energy to industry – again because we’ve never gotten serious about making it happen.

    Men rode rockets to the moon half a century ago. The internet has been a fact of domestic life for nearly a third of a century. There isn’t much humankind cannot do. But as long as governments subvert progress by protecting vested interests, the status quo will stand.

    Your essay envisioned a transition over many decades. 2 of those decades have now passed, in which liberal governments have done all they can to ignore (and later discredit when it became unignorable) scientific consensus using 2 fatuous arguments:

    – we’re too broke to change and
    – were too small to worry about.

    Per capita, Australia has long been one of the richest countries, and the worst carbon polluter, on earth. We have enriched ourselves by pumping the effluents of wealth production into the water and air for no reason other than it’s cheaper to do business that way. And we’ve done it knowing that this vandalusm will be paid for by our kids. Which is where we are now – paying the bill for the arrogant excesses of gen x and baby boomers. The defence for our vandalism has been that it’s up nations like India and China to lead the world out of this insanity. And this has long been a convenient dereliction of responsibility to the rest of the world in my opinion.

    The argument that we’re too broke to change reminds me of the obscene settlement the rich divorcee receives on the grounds of living-in the-manner-to-which -he/she-had-become-accustomed. The human race has been living outside its means for long enough to now bring us face-to-face with a terrible future. The way out needs to be led by a developed world made wealthy by long term environmental crime.

    While watching the telecast of Peter Costello’s early budgets, I remember being struck by his use of the word ‘consumer’. He said it several times, and like a hammer between the eyes, i woke to what a repellant concept that was. Here was the second most senior politician in our nation telling us that the job of a good Australian is spending money. I believe that the greed that has gotten us to where we are has been woven into the Australian psyche by powerful people who talk like this. Instead of talking consumption, why don’t our leaders talk restraint? And this is the domain of the denial that underlies all capitalist politics – that that which has worked for us before will work for us now, without regard to consequences or sustainability.

    All talk in the discussion is about enabling more consumption. let’s hear the government talk instead about decreasing demand. A great way to reduce your power bill is to use less of it. I don’t think it’s unreasonable to conclude that whatever you supply, we will consume. Because that’s what we consumers do – consume.

    To understand what unfettered consumption does, Coles amazing capitulation on free bags (due to abuse of its staff by ‘consumers’) is a case in point. Don’t look just at what consumerism does to the environment, look also at what’s it’s done to the people.

    So ted – this is my essay. I didn’t intend it to be, but your work presented a chance to exercise some arguments that I never really put to the test. So please destroy them. I’d love you to prove me wrong.


  3. Lee, let me first of all thank you for your comprehensive and considered response to my essay. I appreciate your taking the time to share your thoughts with me. Mind you, I have little ambition to change your mind, but I enjoy the opportunity to share my thoughts with you. I find both public speaking and writing are marvellous opportunities to clarify my own thinking around issues of importance to me.
    This is no doubt a complex issue and it is hard to get your head around it. I have resorted to trying to break the problem up into four component parts, viz.
    1. Is global warming a reality or are we experiencing climate variations which over the millennia has been the earth’s fate since time immemorial?
    2. If global warming is real, are its causes anthropogenic, particularly with respect CO2 emissions?
    3. If we decide that increased levels of atmospheric CO2 are indeed the problem, what should our response be – abatement, adaptation or some combination of both?
    4. If we opt to take an abatement approach, what should be the response of the electricity industry?
    I am going to briefly respond to these questions and then I will try to directly respond to the queries in your response.

    1. As you would remember the world first became really alarmed at the greenhouse effect being linked to global warming in the early 1990’s. In 1992 there was sufficient concern for the United Nations to host the United Nations Framework Convention on Climate Change. This led to the 1997 Kyoto Protocol which sought to have nations limit their respective CO2 emissions. This was followed by the more recent Paris Agreement. All this activity was built on the two premises that global warming is real and that atmospheric CO2 was the principal culprit. Tellingly, much of this was based on climate models predicting rapid (in historical terms) global warming. Of the 100 or so climate models subsequently produced, none has adequately predicted global warming and most have vastly overestimated the rate of increase of global temperature. The earth’s temperature seems to be more strongly correlated with the solar than CO2 levels.
    As I have pointed out in previous essays, global warming has many possible causes. A study of the geological history of the earth indicates huge variability in the earth’s temperature. There have been times when the concentration of CO2 in the atmosphere has been far higher and yet coincided with ice ages.
    I am not convinced that global warming as portrayed by the climate alarmists is happening.
    But I am a rather cautious person and when I became aware of the greenhouse effect and the likelihood of catastrophic global warming I thought it would be prudent to take a conservative approach and err on the side of caution. This was before I actually understood some of the economics of the abatement processes.

    2. But let us quickly review the greenhouse effect and what part atmospheric CO2 might play in the process.
    We know that carbon dioxide is not the only greenhouse gas. Water vapour is also a greenhouse gas, and methane and other organic gases are far more potent greenhouse gases than carbon dioxide. And even with atmospheric carbon dioxide there are large natural contributors such as emissions from volcanoes and the products from forest fires. So it would seem to me that merely curtailing man-made carbon dioxide emissions might not solve the problem.
    Only forty years ago, there seemed to be a growing consensus that, far from global warming, a Little Ice Age might be imminent. Shortly after this, scientists started talking about the “greenhouse effect” and how radiant energy from the sun was polarised in the earth’s atmosphere, reducing the amount of energy that could be reflected off the earth’s surface and be subsequently radiated back into space. The offending components of the earth’s atmosphere that create this effect are the “greenhouse gases”.
    Greenhouse gases constitute a very minor percentage of the earth’s atmosphere. (That does not mean to say they still might have a significant impact.)
    Those gases responsible for the greenhouse effect, as we saw above, are largely:
    • Water vapour,
    • Carbon dioxide,
    • Methane,
    • Surface level ozone, and
    • The oxides of nitrogen and fluorinated gases.
    By volume, dry air contains 78.09% nitrogen, 20.95% oxygen, 0.93% argon, 0.04% carbon dioxide, and small amounts of other gases. Air also contains a variable amount of water vapour, on average around 1% at sea level, and 0.4% over the entire atmosphere. Both water vapour and methane are more potent greenhouse gases than carbon dioxide.
    Water vapour creates a positive feedback loop. As the atmosphere warms, more water evaporates. Higher concentrations of water vapour aid further warming because of its greenhouse effect which in turn evaporates more water, and so on.
    The concentration of methane in the atmosphere (like CO2) has increased with increased human habitation. Humans have added to the methane load in the atmosphere by such activities as livestock farming, the burning of carbon based fuels, and the decomposition of waste in landfill.
    Despite this, the attention of the environmental movement has largely been on the concentration of CO2. Whatever part CO2 plays in global warming, one thing we know for certain is that increasing levels of CO2 promotes plant growth and there is considerable evidence to suggest growing levels of CO2 in our atmosphere are contributing to a re-afforestation of many denuded landscapes. This (in contrast with water vapour) constitutes a negative feedback loop. As more plants grow, more CO2 is absorbed from the earth’s atmosphere aiding a return to a steady state situation.
    You should note from this discussion that the atmospheric greenhouse impacts are very complex and there is little evidence to suggest that scientists can adequately model this dynamic.

    There are many unknowns when we model the earth’s response to global warming. Among the least understood is the capacity of the oceans and indeed, our soils, to absorb carbon.
    But even beyond this, most environmentalists emphasise the deleterious effects of carbon dioxide in the atmosphere and few admit of its benefits. As mentioned earlier, Carbon dioxide stimulates the growth of plants. Graham Lloyd, Environment Editor for The Australian tells us a recent report from NASA indicates that “between 25% and 50% of earth’s vegetated lands show significant greening across the past 27 years largely because of rising levels of atmospheric carbon dioxide.”
    Lead author Zaichun Zhu from Peking University , says the extent of greening over that period “has the ability to fundamentally change the cycling of water and carbon in the climate system.”
    (One of the benefits of such “greening” would be that biomass generation would become more viable. This would prove beneficial because such generation counts as renewable and need not be intermittent like wind and solar. And of course the cultivation of crops would become more productive.)
    So in summary it is hard to determine whether increases in the atmospheric levels of CO2 are indeed a good or a bad thing. But for the sake of argument let us assume that CO2 emissions are problematic and are in some degree responsible for global warming. If that is the case what should our response be?
    3. As I wrote in my recent essay, all the pledges made by countries as a result of Kyoto and Paris (even if they were honoured, which seems on available evidence, very unlikely) have minimal effects on atmospheric CO2. The globe would virtually need to eschew the use of fossil fuels entirely to have any discernible effect.
    But not only that, there is some opinion that global warming might not be the catastrophe that climate alarmists have made out. For example, currently deaths due to extreme cold far outweigh deaths due to extreme heat, and there could be some net societal benefits associated with warming.
    In Australia in recent years we have had the unedifying spectacle of a respected researcher, the Danish Bjorn Lomborg, being hounded from our shores because he failed to align himself with the catastrophic views of many of Australian zealous anti-climate change academics.
    Lomborg, is again, not a climate change denier. But being an economist he understands that we have finite resources with which to solve the world’s problems. His research shows that in terms of its net benefit to the world, it would be better to prioritise reducing hunger and preventing disease above our response to climate change. Now if you are a well-off academic in a university, or an environmentalist sipping lattes in the trendy cafes of our suburbs, that might not be so apparent to you. But if you live in a third world country, struggling to feed your family and under the constant threat of succumbing to malaria it probably makes some sense.
    Lomborg, also to the chagrin of the environmentalists, argues that a major factor impeding the development of Third World countries is energy poverty. He argues that the world’s poor need better access to cheap fuels, including fossil fuels.
    So consistent with this philosophy, I believe it is prudent to respond to climate change but not in such a way as to harm the Australian economy in the process. It should also be borne in mind that whilst we have a carbon-intensive economy our net contribution to the world’s carbon dioxide emissions is miniscule. And the exploitation of our fossil fuel reserves not only stimulates our economy but assist third world countries in improving their standard of living.
    4. So what are the implications for energy policy? Well, I have virtually stated my position above. By all means let us move to renewable energy generation, but not at the expense of our standard of living. Let us use all the available technologies, including gas and high efficiency low emissions (HELE) coal, to ensure low priced, reliable electricity supply.
    Now you contend that this is a not a short term problem but one that had its seeds sown twenty years ago. Now this is indeed true. But the problem had its genesis in the establishment of the National Electricity Market (NEM). It was assumed by economists that the market would send the price signals required to ensure competitively priced, reliable electricity. But there were distortions in the market. The two most prominent distortions are:
    • Interventions by the Federal and State Governments to favour the commissioning of renewable technologies. This commenced when the Federal Government in 2001 legislated in support of a modest 2% renewables policy. But in the decades since Labor State Governments have legislated much higher, unrealistic targets.
    • In the NEM there are no market signals to encourage reliability of supply. Consequently despatchable generation such as coal, gas and hydro is undervalued.
    The problem has been exacerbated in recent times by the issue being over politicised. Politicians are pursuing idealised objectives with little understanding of the impacts on engineering and economic outcomes. In my own day, the Minister for Mines and Electricity had no understanding of how the electricity market worked at all!
    You mentioned the ever increasing desire to increase consumption. Well one thing we have found is that electricity demand is highly price elastic. Price increases in the last two decades have resulted in reducing per capita demand. Whilst this has saved us from more extensive blackouts it has had the downside of rendering energy intensive industries uneconomic. But more importantly it has had deleterious effect on those with low fixed incomes, such as pensioners.

  4. Oh – Ted, I don’t know where to start.
    Firstly, I challenge your oft-quoted assertion that the cause of alarming increase in electricity prices “has been the undue haste to install renewables”. To my knowledge this is not true. Electricity prices started increasing two decades ago, long before renewables were any significant factor. You mentioned in your 8 Aug reply about the NEM being established then, but two things happened: (a) The so called “gold plating” of the networks put much greater costs onto customers than there should have been, and (b) Price gouging by utility asset owners (the state govt in Qld and private owners in other states) where power systems were treated as a milch cow to return as high a dividend as possible. (All of this was approved by the national regulator in a complete distortion of a pseudo-regulated/pseudo-free-market system.) Renewables played very little part in any of this. Sure, high feed-in tariffs for roof-top solar, were initially good but it was not a good idea for them to stay on for too long. However, their effect on overall electricity price rises was minimal. The ACCC report, from which you only selectively quote, made clear that over 40% of electricity price rises over the last decade were due to network costs, and less than 10% was due to renewables.

    Secondly, I will not challenge your views on climate change, apart from four observations:

    1. Here are some quotes about the effect of volcanoes:

    from The Guardian: “As for greenhouse gases, underwater and land-based volcanoes are estimated to release, in total, around 100–300 million tonnes of CO2 each year, according to the British Geological Survey and the US Geological Survey. That’s a large quantity, but only around 1% of the amount that humans release from burning fossil fuel alone.”

    from Scientific American: “There is no doubt that volcanic eruptions add CO2 to the atmosphere, but compared to the quantity produced by human activities, their impact is virtually trivial: volcanic eruptions produce about 110 million tons of CO2 each year, whereas human activities contribute almost 10,000 times that quantity.”

    2. Contrary to your assertions that the ‘alarmists’ predictions had not come to pass, I consider that there are so many examples recently where the on-ground weather patterns have greatly exceeded what the earlier IPCC reports had predicted. e.g Extremes of hot, extremes of cold, extremes of wet and extremes of drought, seem to be much more prevalent in the last few years.

    3. To use the expression “environmentalist sipping lattes in the trendy cafes” is a derogatory put-down and does nothing to further the scientific veracity of your argument.

    4. Have you put your hypotheses on the contribution to climate change made by water vapour, methane, etc to any climate scientists or scientific bodies, such as CSIRO or University researchers?

    Ian Herbert

    1. Ian , it is always a pleasure to hear from you. You are well-informed and your motives are commendable.

      I am reluctant to engage you in a broad ranged discussion. I would rather cut to the chase.

      Let me ask you these questions.

      Do you think that Australia should pursue an emissions reduction regime when our emissions only comprise 1.3% of the world’s Carbon Dioxide emissions? Do you believe that will have any discernible effect on global warming.

      How do you argue against the case made by Bjorn Longstrom that we could aid the world better by trying to ameliorate world poverty than by reducing carbon emissions?

      What is the sense in locking into a carbon dioxide emissions reduction target when the world’s most gross emitters (India, China and the USA) refuse to participate in the game?

      I would be interested in your response.



  5. Ted, Always a pleasure here also. In answer to your questions:
    (a) Should Aust pursue an emissions reduction scheme? YES
    (b) Do I think it will have any discernable effect? NO [However by us playing our part is the only way that we can attempt to influence other countries. No doubt you continue to vote in elections, and would do so even if it were not compulsory, even though you have one vote in 30,000 in state elections (0.003% influence) and one vote in 90,000 in federal elections (0.001% influence) ]
    (c) Bjorn Lomborg’s proposition? YES, surely we can do both. [ Many of the poorest countries are going to be most impacted by climate change.]
    (d) As for the USA, Trump is a gross anomaly to the current political situation in many ways, and he will hopefully be replaced by a more responsible leader one day. Many states in the USA are adopting their own emissions control schemes to overcome this problem.
    Regards, Ian Herbert

Comments are closed.