A problem to reckon with
The horrific bushfires that devasted large parts of Australia last summer brought intense criticism of the Federal Government. The link between these catastrophic events and climate change seemed obvious to most. Nevertheless, the Liberal-National Coalition and Prime Minister Scott Morrison were perceived as dismissive of the threat posed by global warming, as well as the solution proposed by the scientific community: cutting greenhouse-gas emissions. In response to the criticism, the Government promised a plan to address the issue – the Technology Investment Roadmap (TIR); the brainchild of the Energy and Emissions Reduction Minister Angus Taylor.
In this post we quickly review what the TIR is about, highlighting the good and the bad.
What is it?
The TIR is a multi-year plan to direct public money towards the research and development of emission-reduction technologies. Its vision depicts “a prosperous Australia, recognised as a global low emissions technology leader”. Such positive rhetoric is welcome, especially when compared to the denialism displayed by several Coalition MPs in the very recent past.
High risk, high reward
Developing such new technologies is a high-risk high-reward exercise. The chance that this costly effort will lead to nowhere is significant. This is precisely the reason why the private sector does not engage in such research itself, and why the government needs to step in.
In the best-case scenario, some of the projects that comprise the TIR will lead to improved technologies. If the research is successful and commercially viable, the private sector will stand to benefit through the application of such technologies in providing low-emissions goods and services to all. Australia can also potentially place itself at the forefront of a bourgeoning global industry.
In the worst-case scenario however, the entire exercise will result in a waste of tax-payers money.
As with all research, there is no guarantee of success or return on investment. However, it seems that the government decided to focus on highly risky projects, rather than concentrating on well-established technologies (such as solar and wind farms, small- and large-scale battery stations, electric vehicles, …) that could drive down emissions much faster.
The main ingredients
A wide range of technologies is discussed in the TIR. At the initial stage though, the investment will focus on 5 projects.
1) Clean hydrogen under $2 per kg
Hydrogen is considered by many the source of energy that will fuel our future. The chemical process behind its generation (hydrolysis) is quite simple: place water in contact with electrostatic energy, and the outcome will be hydrogen and oxygen. When the electrostatic energy is generated from renewable energy, this process produces no greenhouse gas. An alternative way to produce hydrogen might involve the use of natural gas (methane) in conjunction with carbon-capture and storage. However, there is some scepticism about its feasibility.
There are several issues that make the cost of generating and transporting hydrogen quite high. The goal of the TIR is to bring down the cost of hydrogen to $2 per kg. The potential of this industry, particularly export opportunities, is huge.
2) Energy storage under $100 per MWh
Energy storage is another key problem that the TIR aims at addressing. Cheaper energy storage means that it would be more widely adopted and improve the viability of zero-emissions energy projects. This will guarantee a reliable source of energy even when – quoting the stereotype – the sun doesn’t shine or the wind doesn’t blow.
The cheapest form of energy storage is currently pumped hydro. However, each pumped hydro project is massive and requires investments of tens of millions of dollars. The dam storage required for such projects also can have other environmental impacts, such as destroying farmland or wilderness areas – both valuable carbon sinks.
On the other hand, lithium batteries offer an infinitely more flexible – albeit more expensive in terms of storage capacity – alternative. Technological progress in this sector is advancing extremely fast, as Elon Musk keeps on reminding us.
3) Low carbon materials
The TIR’s goal is to bring the cost of low-emissions steel below $900 per ton and aluminium below $2,700 a ton. Such goals will be achieved in conjunction with the development of cheap low-emissions energy. The development of cheaper, low emissions steel and aluminium will have significant potential for domestic industry as well as Australian exports.
4) Soil carbon measurement below $3 per hectare per year
One of the easiest ways to remove carbon-dioxide from the atmosphere is revegetation. Farmers and other entrepreneurs could be financially incentivised through agricultural practices that capture carbon-dioxide into the soil. The problem is how to prove that such projects are effective in capturing carbon dioxide. Currently, the cost of measuring the amount of carbon-dioxide stored in the soil is so high as to make the entire exercise uneconomical. Technological improvement in this direction might form part of a market for carbon credits.
5) Carbon capture and storage (CCS) below $20 per tonne of CO2
This is without doubt the most controversial part of the plan. CCS are technologies that aim at preventing the release of carbon-dioxide into the atmosphere as a result of burning fossil fuels (like coal, oil, natural gas, etc.) by underground storage. If this was achievable, it would be revolutionary. In practice, this is a line of research that has been explored globally for a many decades without significant success. Some worry that advertising the feasibility of CCS is merely a way to extend the lifetime of the fossil fuel industry, with the consequential effects on the planet.
Who calls the shots
These 5 key areas of research will have priority at the initial stage. However, this might change in the future. A special commission (the Ministerial Reference Panel), appointed by the Energy and Emissions Reduction Minister, will review each project on a yearly basis. Going forward, some projects might be terminated, and others might be added.
This short-term attitude is a source of concern to some, as it is well known that innovative research requires timeframes longer than one or two years. Even more concerning is the fact that the commission reviewing the TIR is under direct Government control. The risk is that in choosing the priority projects, considerations of short-term political convenience might override the main objectives of emissions reduction and long-term economic development. Of course, the Carbon Fee & Dividend and other carbon-pricing frameworks would not involve as much Government intervention.
A small step forward for Government, but is business being left behind?
The TIR is a strongly top-down approach. The Liberal-National Coalition wants to demonstrate that it is addressing the increasingly untenable problem of our high greenhouse-gas emissions.
Compared to other possible solutions, the TIR gives the Federal Government the highest level of control over the direction in which public money will be allocated. For this reason, the TIR has been criticised even from right wing commentators, who ironically compared it to a Stalinist five-year plan. In fact, the TIR is the opposite of the kind of “market-based” solution that is typically embraced by liberal thinkers. This dirigiste attitude is most evident in the way natural gas (aka methane) was incorporated into the plan. At no point did the Government show that it had considered whether there is a need for natural gas, nor did it demonstrate that alternative solutions were considered.
The weakest point of the TIR is that it is an attempt to solve the massive challenge of decarbonising our economy by public intervention only. To succeed, the private sector needs to be fully involved. The Coalition’s approach lacks the right incentives for the private sector to innovate and grow in this field. A carbon price mechanism would do precisely that.
In summary, the TIR is a welcome step forward. However, it will likely be more expensive than we would want and less effective than we would like.
The content of this post is based on a presentation by CCL’s NSW coordinator Peter Todd.
Featured image: Nick Haggarty (ABC News).