Submissions To The Garnaut Review  

TOD ANZ has a submission to the Garnaut Review, arguing that both global warming and peak oil need to be taken into account when designing Australia's response to climate change.

It is essential to extend the questions posed in the issues paper and ask: What should be a broader set of policy responses to address transport emissions reduction considering both demand and supply-side factors?

This submission contends that emissions from Australia's transport sector are best addressed as one part of an innovative and integrated policy package that tackles the inevitability of major reductions in oil use. Australia faces particular difficulties transitioning away from oil dependence because of the geographical realities that require us to deal with the "tyranny of distance" at all transport scales – globally, nationally, in our regional areas and across the sprawling suburbs of our large cities.

A comprehensive policy response to these challenges goes well beyond the remit of your current Climate Change Review so let us focus on policy matters most closely related to reducing emissions from transport. Four policy thrusts are required to shift economic resources away from business-as-usual into future-proofing Australia's transport sector, thus reducing the risk of disruptions from oil shortages and eventually reducing emissions by large amounts. I am confident that your review will deliver recommendations supporting all of these policy thrusts, not least through targeted application of the revenue from the rent value of emissions permits.

The four policy thrusts are;

1. Redirect future infrastructure investments towards low emissions transport modes such as rail freight and public passenger transport. Urgent support for such investments is vital because transport construction projects take many years and lock in a legacy of favoured travel options, fixed emissions profiles and sunk costs that will be with us for decades
2. Ensure the full cost impacts of emissions trading and global oil price rises flow directly through to end users to reshape consumer markets by encouraging transport usage efficiencies, modal changes and positive technology choices without interference from perverse subsidies or other mechanisms that may delay end-user moves to a future lower-emissions transport model
3. Develop and fund social equity policies to compensate and help reorient the most disadvantaged, such as low-income residents of outer suburbs and country regions, towards less dependence on oil fuels
4. Focus strong emissions reduction incentives and efforts on the electricity generation sector in anticipation of transport becoming a growing user of electricity in place of oil (indicative scale could be a currently unforeseen 20 – 50% addition to national electricity demand by 2030)

Australia is doubly fortunate in being a wealthy country and in having a comfortable though diminishing degree of self-sufficiency in oil supplies along with ample LPG and natural gas supplies (ABARE 2008). These factors can ease our transition to a low-emissions economy and make it a lot more painless than the journey faced by most other countries in the world.

The remainder of this submission enlarges on the global oil supply context and on each of the four policy thrusts outlined above. It also provides a set of references for more detailed support of the arguments presented here. A key reference is the recently published book Transport Revolutions – Moving People and Freight Without Oil (Gilbert and Perl 2008) which contains extensive data on the current realities of the global transport industry and puts forward policy options and plans for revolutionary changes to maintain transport services in an oil-depleted world.

The overriding message is one of urgency. Every week that passes now without vigorous action to prepare for the coming world of scarce and expensive oil has an opportunity cost that we will pay many times over if we are forced into crisis actions such as abandoning urban motorways half-built and scrambling to compete with other countries at high prices for railway and electric vehicle manufacturing capacity.

Why should talk of such crisis actions be taken seriously? Recent oil market movements point to the answers. Even without regard for the sound geological basis of "peak oil" arguments (see for example Hirsch et al 2005, Senate 2006), the sustained rise in the price of oil over the past 15 months exceeds any mainstream projections and suggests that larger forces are at work. Indications are that geopolitical factors may be converging to encourage some oil exporters to leave more of their petroleum assets in the ground while others are experiencing rapidly growing domestic demand which reduces their net export volumes (Brown & Foucher 2008).

Net oil exports are the critical survival issue for oil importing countries – the majority of nations – who rely on a few countries that are rich in oil to export enough to supply everybody else's needs for liquid fuels; needs which by and large can only be supplanted by other energy sources slowly and with difficulty.

Fig 1. Global net oil exports showing indications of decline over the last two years
Source: Net Oil Exports 2008

As shown in Fig 1 global net exports of crude oil are displaying a worrying downward trend in the face of global demand which has grown at 1.4% to 1.5% per year since 2004 (IEA 2008). Furthermore, known oil supply augmentation projects out as far as 2012 show little hope of adding new supply capacity fast enough to keep up with projected demand (Oil Megaprojects Task Force 2008). Some analysts predict that oil availability to OECD countries including Australia could be as much as 8% below today's volumes by 2012 (Rubin and Buchanan 2008, Table 2 on p6), and will likely decline further in future years.

The Clean Energy Council is working with industry and regulators to deliver a suite of sustainable energy policies that will effectively cut greenhouse gas emissions at least cost to the economy. These policies form the Council’s five point plan.

* The Council supports a ‘cap & trade’ scheme at the earliest feasible time
* The Council calls for the emission trajectory to be in line with the scientific evidence, match the Kyoto target for Australia between 2010 and 2012 and then set to meet the government’s announced target of 60% reduction by 2050.
* The Council supports multiple trajectories with a five-year notice period to provide investor certainty
* Trajectories should only be able to be tightened to provide market predictability
* Coverage should include all known GGH gasses and all industries with the scheme widening as emissions calculation accuracy improves
* The ETS should allow for unlimited banking and very limited borrowing to cover administrative oversights only in balancing annual liability (as in the MRET scheme)
* Transitional support for business, communities and individuals should be part of the design
* ETS will succeed when coupled with removal of existing market and non-market barriers
* ETS success requires complimentary measures including a renewable energy target and energy efficiency targets to ensure least cost and minimal disruption to the economy
* R&D funding is paramount - a proportion of the auction revenue should be recycled into Australian R&D programs.
* Australia's renewable energy industry is ready to meet demand with over 14,000 megawatts of potential projects ready to deploy
* Offset credit permits and their use will need to be comprehensively defined in order to maintain the credibility of the scheme