ALUMINIUM SMELTERS TAKE TOO MUCH ENERGY FOR GARNAUT
3 October 2008
MICHAEL STUTCHBURY ECONOMICS EDITOR
CRITICS complain that Ross Garnaut's greenhouse gas cuts won't save the earth from overheating. Yet his Climate Change Review projects extraordinary adjustment for the Australian economy. This would transform Australia's energy base that, harnessed to the population's muscle and brains, generates our national prosperity.
In 2006, Australia emitted 576 million tonnes (Mt) of carbon dioxide equivalent greenhouse gases. This would rise to more than 1000Mt by 2050 with business as usual and would near 2000Mt by century's end.
Garnaut's report maintains that Australia can pull its weight in a global deal to reduce emissions by 80 to 90 per cent on 2000 levels by the middle of the century.
It would jack up electricity prices, bury coal-burning emissions underground, shut down most of our aluminium industry, take up renewable energy and perhaps nuclear power, convert our petrol-guzzling car fleet to electricity and anticipate technologies that suck carbon dioxide out of the air.
Per head of population, Australia emits 28 tonnes of greenhouse gases each year, more than any developed economy. Only five countries rank higher: Bahrain, Bolivia, Brunei, Kuwait and Qatar.
With strong economic growth, Australia's power emissions are still rising. We are meeting our Kyoto targets, but only by ending mass land clearing. Our rich coal deposits provide a cheap power fuel and burning coal emits carbon dioxide. Australia's electricity supply is more emissions intensive than any other developed economy. On latest figures, Australia's electricity is generated mainly from black coal (54 per cent) followed by brown coal (21 per cent), natural gas (15 per cent), oil (2 per cent) and renewables (8 per cent).
Breaking the link between economic growth and fossil-fuel emissions would be the job of a carbon emissions trading scheme, with a permit price initially set at a modest $20 a tonne. As the number of permits were reduced, their price would rise, prompting business and households to switch to lower emissions activities that previously lost out on cost grounds.
The graph's dark shaded section shows the projected fall in Australia's emissions as part of a global deal to stabilise atmospheric greenhouse gas concentrations at 550 parts a million. By mid-century, emissions fall 60 per cent below business as usual, shown by the top line. The shaded parts in between show electricity generation provides most (41 per cent) of this emission reduction.
But Australia's actual emissions are still around 400Mt by 2050. Although that's a big fall on business as usual, it is far short of an 80 per cent cut on 2000 levels.
But Australia still meets its 80 per cent ``entitlement'' cut by spending $24 billion or so (in today's dollars) on 300Mt of annual permits sold by other countries.
Such international permit trade occurs because carbon-heavy Australia finds it more expensive than other countries to cut emissions. But this trade mostly ends after the projected permit price rises above $250 a tonne by the last quarter of the century, making ``backstop technologies'' commercially viable. Biosequestration technology could grow algae to take carbon dioxide outof the air, converting it to stable carbohydrates.
When the backstop technologies kicked in, there would be no need to stop burning fossil fuels. By then, the economy would have been ``decarbonised''. To begin with, the rising price of carbon permits would push up electricity prices and curb growth in the demand for power. In the first decade, the big emissions reduction would come from curtailing and even shutting down some of our seven aluminium smelters: Bell Bay in Tasmania, Boyne Island in Queensland, Kurri Kurri and Tomago in NSW, and Port Henry and Portland in Victoria. Smelting alumina powder from bauxite into solid aluminium takes massive amounts of electricity. Australia's aluminium smelters expanded in a big way after the oil shocks of the 1970s, lured by our cheap (and sometimes subsidised) electricity. With the 21st-century greenhouse shock, aluminium will be produced where ``stranded'' hydro-power can't go to other purposes. And Tasmania's spare hydro can be pumped into the national power grid.
Our coal industry doesn't have to follow aluminium out the door, but only if carbon capture and storage technologies become cost effective at the rising carbon price.
If this happens, ``dirty'' coal-fired electricity generation would gradually contract over the next few decades as carbon emission prices rise. Clean coal, gas and renewable energy such as solar, wind and geothermal, would take over. From mid-century, electricity demand would rise as the vehicle fleet is converted to cleaner electricity. Two-thirds of Australia's electricity would be generated from renewables, clean coal and gas supplying the rest.
But if clean-coal technology doesn't come up to scratch, its place would be taken largely by nuclear power, using Australia's rich uranium deposits. Garnaut's key trick is to begin cautiously, allowing carbon pricing to take root, before letting market forces transform the economy's energy base.
Copyright 2008 News Ltd.
The Australian
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