Will COP 26 be an echo chamber of plausible responses to the climate crisis or a forum that drives change? Will COP 26 be the moment that stops the increase in global temperature, or will it be drowned in politics?
Methane at COP 26
Since 1950 atmospheric methane (CH4) has grown from 1220 ppb to 1870 ppb. On its own, it has increased temperature during that period by 0.13C. Breaking up this increase by its components reveals the following:
57% from fugitive emissions from natural gas.
25% from ruminant animals (both farmed and wild).
13% from waste.
9% from fugitive emissions from coal.
6% from rice cultivation.
6% from biomass.
Most of attention in regard to methane emissions has been given to belching from ruminant animals. Yet cutting red meat (and rice) from our diet is not a matter for COP 26, IMO. Yet there are other matters to be considered at this conference. For example, what about fugitive emissions from natural gas?
Let us suppose that in the next 10 years we were able to cut methane emissions from everything except ruminant animals and rice cultivation by 50%. In this case the atmospheric methane would fall from 1870 ppb to 1730 ppb. This would be just the beginning, for it would continue to fall out to 2100. In other words, instead of contributing to the growth in global average temperature, it would mitigate the increases from other sources.
The move from coal to natural gas for electricity generation may have been a good idea at the time, but we should not now chose to use these gases for electricity production. If this is done and also we cut methane emissions from waste as well as changing from biomass to electrical cooking and heating, this would reduce atmospheric methane, without doing anything else. So a cut in methane emissions by 2030 should be on the COP 26 agenda.
Effect of cutting methane emissions
F-Gases at COP 26
When the Montreal Protocol was established in 1990, it was realised that moving from ozone-depleting CHCs to other gases would increase atmospheric greenhouse gases. At the time it was agreed that certain gases mentioned in the Montreal Protocol gases would be fazed out from 2025. Yet there is no sense that this commitment is being taken seriously in the run-up to COP 26. It should be included in the final agreement.
Electricity Production: Low CO2
Presently, there are only two viable models for electricity production in a low CO2 environment: nuclear and intermittent sources. While nuclear is favoured in some places. It is not favoured in other places. In any event, it would appear that following this route is very expensive. On the other hand, intermittent sources, by their very nature, are unreliable.
It is true that cyclic fluctuations through the week can be managed through an appropriate level of storage, which could be via pumped-hydro, batteries and other more experimental means of storing electricity. Therefore, it is not cyclic and predictable fluctuation in demand that is preventing the take up of intermittent power supply. The problem is in the unpredictable nature of supply. The thing that is holding back more widespread use of intermittent supply of electricity is the lack of a plan to cover the shortfall in electricity supply when the wind or the sun fail to deliver the quantum of electricity that is required. This is the biggest problem in moving to a more complete dependence upon intermittent / renewable supply of electricity.
For nations that are already industrialised there is a simple solution at hand, even though it cuts across the ideological resistance to coal. Yes, the solution is to use coal-fired generators (and any existing redundant gas-fired generators) to provide back up generating capacity in the case of a failure in supply of electricity from renewable sources. In the short-term, the existing coal and gas-fired generators could be brought on line in the event of a failure of supply. Even with the current configuration, this should happen in less than 20% of the time once the intermittent supply system generally provides 100% of electricity power. This approach will ensure a 80% cut in the CO2 emissions from this source. On the other hand, it does mean that banning coal from the electricity-generation field will not be possible, or even practical (if one really wants to cut CO2 emissions).
In a system that does not use nuclear power, it would appear that a properly designed system will provide all power to consumers from renewables and from storage. Under this system, the storage would be replenished from time to time using coal-fired generators. This would only happen when the storage falls below a level in which the operators believe is too low for a measured guaranteed security of supply. Under this scenario, the coal-fired generators would run flat-out until the storage was replenished.
In a system that uses nuclear power, the power stations could run continuously, replenishing the storage in a balanced manner.
Oil-based fuel
We already know how to cut the usage of oil-based fuels for passenger vehicles and light trucks. The simple solution is for each country to mandate that new vehicles must be fully electric. However, this will bring many problems in its wake. These include a complete replacement of the refueling system and potential massive increases in the prices of raw materials. It would be more sensible to move more slowly.
The ideal solution, hopefully to be discussed at COP 26 is for each nation to move towards mandating hybrid, plug-in hybrids and fully electric vehicles for new vehicles well before 2030. The market can then manage the extra cost for each type of vehicle. Since a simple hybrid is not much more costly than a vehicle with a 100% internal combustion engine, this can be the starting default. Even this will cut the consumption of petrol by about 30-40%, which will lead to a significant reduction in CO2 emissions from this type of vehicle.
Solutions for heavier trucks and buses and ships can be considered at a later period. The end result should be that by 2030 we will have a solution prepared for all oil-based fuels.
Cement and Steel
Solutions are currently being considered for the CO2 generated in these two processes. Time is required to allow feasible and proven solutions to emerge.
Conclusion
Significantly cutting greenhouse gas emissions in this way by 2030, in the areas where we already know how to do it, will avert the climate change crisis, and put us on a path to prevent global warming since industrialisation of more than 1.5C. Early and radical action is required.
Such action should be legacy of COP 26. The question remains, will the representatives have the courage to take the actions that are required? Will the members present be willing to abandon those ambitions that will not lead to that outcome, but will hinder this desirable result.
Electricity demand could be too high at present as China and India increase coal-fired generation and because of the push to cut CO2 emissions from passenger cars.
Expected Electricity demand in 2021 and 2022
The IEA expects that global electricity demand will grow faster than renewables can keep up in 2021. Even though generation from renewables like hydropower, wind and solar is due to grow 8% in 2021 and by more than 6% in 2022, it will only be able to meet about half the projected increase in global electricity demand. The rest will be met mostly by thermal plans that burn fossil fuels, especially coal.
Furthermore, IEA expects most of this extra demand will come from China and India.
China is pushing hard to increase electricity demand and supply
It is well known that China is increasing its coal-fired generation capacity. A generous explanation is that China could be using this as an opportunity to provide back-up generation power once its intermittent renewable capacity can provide most of its demand needs. Backup capacity is needed once any system goes to 100% renewables during ordinary operations. This is because all intermittent supplies can fail and these failures can spread over an extended period. Storage can meet many of these shortfalls in supply, but there is a point where storage will not be sufficient. It is at this point that it coal and gas-fired generation will be required. It is only prudent to provide for this capacity.
India is massively electricity poor.
No-one can seriously complain about India increasing its coal-fired generation. In 2016 it was running at about 2 tonnes per person CO2. China was running at about 7 tonnes per person and USA was running at 15.5 tonnes per person. However, once it has properly addressed this issue, it should eventually aim for 100% renewables during ordinary operations. Then it will need backup generation capacity which can be supplied by periodic running of its legacy installation of its fossil-fuel generators.
OECD nations need to cut fossil-fuel generated electricity
Without cutting greenhouse gas emissions the global average temperature will continue to increase. A cut in the level of emissions can be achieved, and this should result in global average temperature being held at 1.5C above pre-industrial levels. It will still bump above this, but will also fall below, as has happened in March 2021, which is 0.33C below March last year.
It is a reasonable target for every nation that can do it (i.e. the OECD nations) to run electricity generation on 100% renewables during ordinary operations by 2030. It could keep its remaining coal and gas-fired generation to be only used to provide backup capacity. If this is done, it will assist in levelling this curve much earlier than 2030 and give the world more time to solve the intractable problems with steel, cement and building heating.
The way this could work is for coal and gas-fired generation to be removed from directly supplying the grid. This capacity then can be used to renew storage of electricity. It only needs to run when storage capacity is seriously depleted, but during that time it can be run at 100% of capacity 24 hours a day, seven days a week. This will minimise the CO2 emissions from this process and hold costs down as much as possible.
The push for fully electric vehicles could be counter-productive
It a nation does not have enough renewable electricity generation to fully supply the grid, it should consider very carefully whether fully-electric vehicles are as CO2 free as is often claimed. If additional fossil-fuel is used in generating electricity as a result of the widespread introduction of fully-electric vehicle, there may be no actual cut in the CO2 emissions for that country as a result of this policy.
It should be noted that non-plug in hybrids can cut fossil-fuel usage by almost 50%. Each country should to take this in account.
The aim of Net Zero GHG emissions is to stabilise global average temperatures, it is hoped that it can be achieved at 1.5C over pre-industrial levels. The calculation of CO2e for each of the GHG gases needs to take into account the impact of each of these gases upon global average temperatures. For CO2, it is quite simple: just take the quantum of the emissions themselves. 400 parts per million of CO2 equals 400 parts per million tonnes of CO2e. Since N2O has a half life of around 120 years, the normal calculation to convert to CO2e applies. In this case, 300 parts per billion of N2O equals 89 parts per million of CO2e. For the other gases a different calculation must apply. Since the other gases have a half life that significantly impacts their warming potential (methane has a half life of 9.5 years), we cannot just keep adding these warming potentials into our CO2e values. We have to take into account the progressive reduction in the atmospheric levels of these gases from previous emissions. For each year, we can (roughly) add the current emissions into CO2e, but we also have to deduct the losses into the atmosphere from previous years.
Net Zero from methane
For methane, we can simply deduct the losses attributable to the methane emissions in prior years.
Year -1: 4.75%
Year -2: 13.80%
Year -3: 21.99%
Year -4: 39.40%
Year -5: 36.11%
And so on into infinity.
If the world reduces the absolute value of methane emissions in each year, this gives us all a negative CO2e value that can be shared around amongst all nations. This will soften the required reductions in regard to continuing emissions of CO2 and N2O. This negative impact will continue out to 2100 if the reductions in these gases are sufficiently large. It can also go beyond this if the absolute reductions continue. For methane, the most significant element in total emissions consists of the fugitive emissions from coal extraction and natural gas extraction, transportation and use, so it is important to cut these as the first priority.
Emissions of methane are currently around 800 million tonnes. Of this total, about 26% can be attributed to coal and gas fugitive emissions (including the failure to manage leaks properly, especially around the year 1990; some mismanagement is still continuing). If coal use were entirely eliminated, natural gas cut down to only 20% of the current use (for non-energy industrial purposes only), “leaks” of natural gas cut to a “normal level”, and emissions from ruminants and rice production continued in line with population, the emissions of methane each year would be about 670 million tonnes. This reduction of 130 million tonnes of methane per year, would represent a negative CO2e, starting at zero for 2030 and growing to 3,250 million tonnes per year by 2050.
Negative CO2e from refrigerant gases
The warming potential from refrigerant gases is expected to decline from 2025, due to the further implementation of the Montreal Protocol. The atmospheric level of these gases should reduce from this date. These gases have about half the impact of methane, so let us say that it also represents a negative CO2e, starting a zero in 2025 and growing to negative 1,600 million tonnes per year year by 2050.
Positive CO2e from Nitrous Oxide
Based on the increase in atmospheric N2O, we can calculate that N2O emissions are running at about 320 million tonnes per year. It may be possible to cut emissions arising from agriculture so that the final number were 160 million tonnes per year. Based on radiative forcing at current levels of emissions, this would mean that the net CO2e from nitrous oxide would be about 1,200 million tonnes.
Positive CO2e from CO2
Based on the foregoing, for a Net Zero outcome, CO2 emissions from all sources would need to be capped at about 4,000 millions tonnes. This compares with the 35,000 million tonnes of CO2 emissions in 2018. This was made up as follows:
Coal 13,000 tonnes (including about 2,000 tonnes of metallurgical coal and coal used for residential heating).
Oil based fuels 9,000 tonnes.
Natural gas 6,000 tonnes.
Cement production 1,500 tonnes.
Other (undefined) 5,500 tonnes.
Preferably, all coal uses would have to go if Net Zero were to be achieved. All electricity production using natural gas would have to go. All oil-based fuels need to be replaced by chemical alternatives, like ethanol or ammonia, or by electric vehicles. Alternative ways of building heating will be required, using electric air conditioning and heat pumps with local geothermal resources.
Each of these things will be a challenge, but the biggest is the complete change in electricity generation. Under Net Zero, there is no place for natural gas after 2050. At present, renewables like wind and solar cannot supply anything like baseload power, even with all types of storage, so new baseload resources will be needed, such as geothermal and modular molten-salt nuclear reactors.
Electric cars are a bit of dream, at least for nations that are not rich or have large distances to cover. For the latter, something like the ethanol-driven approach of Brazil seems to be required.
There is considerable hope for “green steel” and “green cement”. We wait in anticipation.
Carbon capture, utilisation and storage
This is a major feature of a recent report by the IEA. The question for me is whether it really will be secure at the volumes being considered. They go far beyond current storage being undertaken in depleted oil and gas wells, with the risk of subsequent leakage currently not being seriously considered.
Net Zero in 2050 vs 2060
The foregoing is predicated on achieving Net Zero by 2050. Whether this is a viable strategy for all nations is debatable. A date like 2060 could be more achievable.
For comparison purposes, I have modelled global average temperatures out to 2070, using two targets. One is that Net Zero, according to my definition, will be achieved in 2050; the other is that Net Zero, on the same basis, is achieved in 2060.
Two scenarios for reaching Net Zero
This graph shows that a result close to 1.6C can be achieved, even if (my) Net Zero is not achieved until 2060. Of course, it will be a safer outcome if OECD nations can arrive at that point by 2050.
Conclusion
Net Zero by 2050 may be a pipe dream, but the world could give itself a number more years before we reach a stable 1.5C if urgent action were taken. This is because reduced GHG emissions in the intervening years will reduce the growth in average annual global temperatures. This will involve action on the following issues:
Do not build any more coal-fired electricity generators where there are other options available.
Do not use gas-fired generators for anything except for the purpose of meeting peak demand.
Develop geothermal resources where available, and enter into fixed price contracts for the supply of electricity from such resources 24/7 (to ensure that such facilities are not bankrupted by operations that can only provide intermittent supplies.)
Governments to push ahead with funding trials for modular molten-salt nuclear-powered electricity generators.
Governments to immediately mandate fuel-flex vehicle electronics, so that ethanol can progressively take over as ethanol production increases and where electric vehicles are not suitable for the particular application, or are too expensive.
Governments to mandate that ships entering their ports use non-CO2 fuels.
Progressively implement reduced N2O agricultural practices as and when the research indicates that this is possible.
Governments to mandate that gas not to be used for building heating in new-builds. When electric air-conditioning is not effective in cold climates, governments to mandate that heat pumps using local geothermal methods be used instead.
It is feasible to remove greenhouse gas emissions in order to cap global warming at around 1.5C. There are simple and well researched ways to do this. Some are under way but they need more work. Ethanol has been overlooked as a serious strategy. It is argued that all of these ways to cut the emissions of greenhouse gases should be done.
Three approaches are considered here and the likely outcomes predicted based on mathematical modelling of the last 170 years and then predicting out to 2070. This requires estimating the likely greenhouse gas levels at the end of each year.
The ideal case, at least as presented here, is a scenario in which it is predicted that it is possible to hold the increase in global average temperature to 1.5C, stabilising at that level. This requires all nations to participate while holding to the timeline indicated below.
While all nations should not find the actions presented here to be an insurmountable challenge, some non-OEDC nations could consider that the timeline for action will be too difficult for them. To cover this situation, a second scenario is canvassed. In this scenario the timeline for implementation for non-OEDC nations starts in 2050 and goes out to 2070. Under this scenario, the predicted outcome is an increase in global average temperature of 1.7C, stabilising at that level.
Finally, we consider a third scenario, which is the continuation of greenhouse gas emissions at the current level out to 2070. The predicted outcome is an increase in global average temperature of 2C and a steady and unrelenting increase in global temperature after that date.
It is noted that these predictions depend upon not encountering a “black-swan” event (being something not already seen in the last 170 years) over the period of the predictions.
Strategies in the “Ideal Model”
Remove coal by 2050
The removal of coal from electricity generation is already happening in OEDC nations. For modelling purposes, it is assumed that this will be completed for all nations by 2050.
Electricity
Removing coal from electricity generation is the most developed strategy for reducing greenhouse gas emissions, at least in OECD countries.
Wind and solar are currently the favoured options in most nations. However since they do not always provide dispatchable electricity, methods of storing electricity and then dispatching it to users are required. Presently, the options available to “store” electricity are pumped-hydro, liquid air and batteries. Liquid-air and batteries can provide a useful mechanism to handle the daily fluctuations in supply and demand; pumped-hydro can handle longer-term fluctuations in supply and demand.
Hydro facilities can provide electricity each day as required. Very large facilities can help to manage longer-term fluctuations in supply.
All storage methods share a single limitation: each can only provide dispatchable electricity if it has previously been stored. In the case of unexpected demand beyond the capacity of renewable resources plus storage to meet, either in the short term or more significantly in the medium term, they do not provide a fall-back facility. Nuclear and geothermal energy are the only currently available fossil-fuel free options that can fill the gap (if they too have capacity). Concerns relating to the safety of nuclear energy may possibly be eliminated by using relatively small molten-salt reactors. If fossil-fuel is to be rejected as a source for electricity generation, this matter should be seriously considered.
Other approaches are already being tried, as discussed here.
Remove 90% of oil-based fuels used for all vehicles and ships by 2050
Action on parts of this plan can be commenced immediately. For modelling purposes, it has been assumed that implementation will begin in 2025 and finish in 2050.
Cars
It is physically and economically feasible to replace all petrol and diesel driven vehicles with ethanol driven vehicles by 2050. It is recognised that, with the falling price of oil, there will be a comparative-cost penalty that cannot be allowed to derail the implementation.
Producing ethanol from crops such as sugar cane and corn, while relatively competitive, demands too much land to be a complete solution. Less land-intensive approaches are required. Ethanol from algae has been explored, but it is not yet viable. A viable method of obtaining ethanol from bamboo has been explored. It is accepted that more research is required to develop a solution that will enable the transition to 100% ethanol. (It could be easier to do this than to produce and store hydrogen.)
An ethanol-based vehicle fleet has already been established in Brazil. This nation has implemented technology that will allow petrol vehicles to accept any ethanol mixture, from 100% down to 0%.
To implement an ethanol-based strategy, all new vehicles must be equipped with this technology. Governments could consider a small government subsidy to make this cost-free to users.
Install refuelling bowsers committed to provide a variable ethanol mixture until 100% ethanol supply is sufficiently secure. Variable mixtures to be provided until around 2050.
Ethanol to be produced in countries with surplus agricultural capacity. Growing crops in regions that do not require irrigation must be a priority, for example, growing sugar-cane in tropical and sub-tropic regions, preferably delivered via locally-owned and managed ethanol facilities in the countries in these regions. This approach will provide those countries with a way of relatively pain-free economic development.
The demand for electricity from this approach will require a much larger electricity-generating sector. This will be difficult for countries that are already electricity poor, especially in the absence of relatively cheap coal-fired generators.
The demand for finite resources in order to build fully-electric cars will create supply difficulties, with the world possibly coming close to exhausting such resources. The supply of cobalt is already under stress and alternatives are being developed. The future supply of copper and lithium could also be a limiting factor.
Fully-electric cars at present are much more expensive that plug-in-free hybrids. While this cost differential should reduce over time as a result of manufacturing efficiencies, it also likely that supply problems could cause the opposite outcome.
Remove oil-based fuels for aeroplanes by 2070.
At present, hydrogen for aeroplanes is just an idea, although widely canvassed. For modelling purposes, it is assumed that it will begin in 2050 and be completed by 2070.
It is now recognised that it is unlikely that batteries will be a viable fuel source for long-distance aeroplanes. Currently attention is being given to using a hydrogen-based fuel. This will require three things:
A more cost effective way of producing hydrogen gas is required (possibly from water through electricity).
A cost effective way of compressing hydrogen gas is required.
The proposed aviation fuel is to be proven to be reliable.
It is assumed that this can be done by 2070.
Remove 90% of natural gas from electricity generation by 2050
Natural gas is currently considered the cheapest and most effective way to provide peaking electrical energy. Removing natural gas from the equation will require the implementation of similar strategies to those required for the removal of coal from the electricity-generation process.
Reducing the use of natural gas will have an another benefit: reduced fugitive gas emissions will progressively cut the level of methane in the atmosphere.
This change is unlikely to happen until 2040 and could be completed by 2050.
10% of natural gas has been retained in the model to allow for additional peaking capacity to be retained in the system to cover the times the electricity grid is under unexpected demand stress.
Remove 90% of natural gas from building heating and industry by 2070.
Natural gas provides a versatile fuel for heating. It works in all climates and is relatively non-polluting. The remaining problems are the CO2 generated from burning it and the methane lost during the processes of extraction, transportation and use. The following strategies could be implemented to remove this fuel use:
Increase the volume of methane trapped from organic waste.
If a cost efficient way of producing hydrogen gas from water through electricity is developed, it can be used for heating.
Electrically driven heat pumps can be used for heating provided an appropriate system is chosen and it is shown to be cost effective.
It is assumed that these strategies can begin to be put in place by 2050 and be fully implemented by 2070.
Cut CO2 emissions from the manufacture of cement by 2070.
Methods to be developed so that CO2 from cement manufacture can be eliminated.
Other Actions
These are things that are being done in some places and should be done everywhere straightaway.
If the above strategies to remove greenhouse gas emissions were adopted by all countries, the predicted result is that global average temperatures increases since Industrialisation will be held to 1.5C by 2050 and beyond, with a standard error of ± 0.11 (mostly due to El Niño and La Niña changes in some years and volcanic eruptions).
The modelled values are based on a calculated formula that takes into account the forcing from the additional greenhouse gases in each year and deducts the estimated cooling effect of atmospheric sulphur. More details on the formula can be obtained here.
In this model, no allowance has been made for capture of CO2 and its storage underground. This could be considered, as a last resort, by nations unable to follow this “Ideal Model.”
Split Model
The Split Model covers the situation of the OECD nations following the “Ideal Model,” but the other nations deferring taking these drastic action to remove greenhouse gas emissions until between 2050 and 2070. In this case, the predicted result is that global average temperatures increases since Industrialisation will be be 1.7C, with a standard error of ± 0.11 (mostly from other cyclic climate factors).
Stable Case
The starting point for the Stable Case is the assumption that emissions will continue out to 2070 at the 2018 levels of emissions. It therefore is called the “Stable Case.” (It is assumed that, in the period to 2030, reductions in CO2 emissions after 2018 in OECD nations will be offset by “catch-up” emissions in the other nations.) The stabilising of globalised CO2 emissions was the substantive result of COP21 Paris.
We can expect a temperature increase of around 2C by 2070 if the world follows the Stable Case, with further increases after that date.
Modified IEA-based model
An IEA report, Energy Technology Perspectives, designed to model the actions required to cut greenhouse gas emissions, assumed that significant real CO2 emissions will continue well past 2070. Therefore, carbon capture, utilisation and storage was an important part of its predicted “net zero” outcome. Since most of its predicted actions can be envisaged as taking place towards 2070, it is likely that a stabilised temperature increase of around 2C will be the result of its strategies, around the outcome of the Stable Case for 2070, but with no further temperature increases.
However, using the IEA report framework, it remains possible to consider cutting CO2 emissions substantially by 2050 even without carbon capture and storage.
A “Modified IEA-based model” of this kind would deliver a global temperature increase of 1.6C, being a result somewhere between the other two main models. The downsides of this approach is that it demands virtually immediate action and some very costly infrastructure. It is unlikely that either of these elements will be delivered. On this basis, the “Ideal model” is to be preferred: it offers a better outcome as well as implementation being less costly and less disruptive.
Comparing temperature outcomes
Projections of Global Average Temperatures
Conclusion
While all the actions to remove greenhouse gas emissions described here are important, there are two actions that will make the biggest difference to the final temperature outcomes.
Removing fossil fuels from electricity generation, especially coal, but also natural gas. Both have a very significant impact on the final result and both create CO2 and methane emissions.
The immediate adoption of a strategy to convert all vehicles from fossil fuels to ethanol. This will be simpler, quicker, cheaper and less resource depleting than the currently favoured electric car strategy.
In addition, many small actions to remove greenhouse gas emissions will accumulate to have an appreciable impact on the final result.
Scott Morrison has overcome the attempt to re-introduce class warfare into the Australian electoral system with a “steady as she goes” campaign strategy.
Labor’s Campaign
In a carefully calculated attempt to re-invigorate union control of the Australia economy, the ALP set out a programme to target all Australians who were not unionists. This programme included the following “difficult to explain” elements:
Eliminating Franking Credits for retirees in self-managed superannuation funds, but keeping them for retirees who are in externally managed Superannuation funds, which are mainly union-managed funds.
Supporting the proposition that there should be an increase to the minimum wage without regard to the possible negative impact on jobs.
Allowing lawless union activity and removing the “industrial umpire” in the construction industry.
Radical action on climate change beyond that agreed at COP21 and beyond that committed to by other comparable nations, with little real consideration of the employment consequences of this approach. Given its rhetoric, and reliance on Greens preferences, the ALP were unable to articulate a policy fix to work around this. This did not trouble voters in Melbourne or Canberra, since they did not perceive a risk to their own jobs, but it did worry voters in Queensland.
Maximising Scott Morrison’s win
Continuing failure of the Liberals to win over Canberra’s voters (and the opinion-makers at the ABC and SBS) will be a cancer on future Liberal policy making. In addition, the time is approaching when the ALP will not be able to govern in its own right, but in a future time its only hope will be to govern in coalition with the Greens. Already, the ALP cannot win many seats without Green preferences.
For the Liberals, it will not be enough to point out the overt socialism of Green leaders or the economic dead-end of Labor’s class war. Furthermore, the Greens are already starting to show more pragmatism than the ALP on policies like the Franking Credits changes, with plans to protect less wealthy investors. The challenge for the Liberals will be to come up with their own version of “reasonable and easily defensible policies.” Here are some suggestions for immediate action:
Fix the “wages drought” by arguing for a $1 hour increase in the minimum wage in this year’s Fair Work hearing.
Make Mabo Day a Federal public holiday.
Explain that Australia is cutting its CO2 emissions in accordance with its commitments to COP21.
Explain that the Coalition has a policy to provide dispatchable electricity via Snowy 2.0.
Protect jobs in vulnerable sectors, such as horticulture, via modest tariffs.
Wages Drought
The government and the Reserve Bank have already agreed that inflation should be between 2% and 3%, yet it is currently running below that level. We know that inappropriate across-the-board increases in wages are the main cause of runaway inflation. Surely the corollary of that is that inappropriate wage-freezes are the cause of inflation running at too low a level. Therefore, it follows that a significant minimum wage increase at this time is appropriate. Don’t drop the ball on this, Scott Morrison. If you do, you will be opening up the field to the ALP to foster discontent.
Most of Australia’s export industries will not be hurt at all by this change, as they operate at the other end of the wages spectrum, with mining, medical research and IT sectors paying well above the minimum wage to most of their employees. The tourism sector could suffer some short-term impacts, but it is a highly vulnerable sector in any case with many other factors playing a more important part than the wages paid to minimum wage employees.
The import-competing sectors could suffer some pain, but the government has the means to address this issue by another mechanism, discussed below.
A change in the minimum wage will be much more effective in restoring balance to the Australian economy than can be achieved by cutting interest rates since that is likely to have other and unmanageable consequences.
Mabo Day
Most Australians recognize the importance of Australia Day. It recognizes the beginning of European settlement in this nation; most Australians are Europeans. On the other hand, Mabo Day could be an equally important day in Australia’s calendar. It would be a day to remember when the original inhabitants of this land began to get legal title to the land upon which they are still living. It can be a day when Aborigines, Torres Strait Islands and the European and other immigrant peoples remember and celebrate the original inhabitants of this land. Scott Morrison, don’t you think it deserves to be recognized?
COP21
In Paris, Australia made a voluntary commitment to cut greenhouse Gases by 26% to 28% by 2025 from 2005 levels.
Since Australia only emits 1.3% of the world’s greenhouse gases, it is not possible for Australia’s action to have any measurable impact on global warming. Therefore, it is appropriate for Australia to be a follower, not a leader in this matter, especially since its commitments to COP21 follow that requirement. Certainly we can do more, provided it can be done without seriously damaging our own economy and without destroying the jobs and incomes of ordinary Australians. This is the lesson of the recent election, which was claimed to be a “referendum” on this subject. The nation’s action on climate change should bring the nation together, not divide it, as the ALP and the Greens wanted to do. On this point, Scott Morrison was clearly correct.
While many in the electorate like the idea of Australia leading the world on climate change action, and probably most of the voters in Canberra (which includes the civil servants advising the government and the nationally-funded broadcasters, the ABC and SBS), it will have a cost in terms of jobs, a point which voters in Queensland clearly perceived.
In addition, Australia should not be party to the worldwide green conspiracy to deprive India and other emerging nations of access to cheap electricity via Australia’s coal. When the West and China emit less CO2 than India it may have a moral right to dictate how India should proceed in this matter. Whether it should do so, even at this point, is a matter of geopolitics as well as moral arguments.
Snowy 2.0
Only the Coalition has a workable policy to turn generated electricity into dispatchable power. This important contribution to this subject was made by the former PM, Malcolm Turnbull, being a policy that Scott Morrison has retained. Of course, Snowy 2.0 is only a start, but this “solution” is likely to be repeated, with the Kidson power project in North Queensland also being indirectly supported by the Queensland Labor government.
On this question, Labor and the Greens have been very quiet, hoping not to give any credit for real action on climate change to the Coalition. Scott Morrison and the Coalition should not allow this policy vacuum in their opponents’ rhetoric to continue to go unchallenged.
Tariffs
All major parties have a blind spot on tariffs, believing for some reason or other that minimum wage Australians can compete with people overseas on half, quarter and even one-tenth of Australian wages and conditions without any problems.
This is a manifestation of the arrogance of the Canberra bubble and I seriously hope that Scott Morrison can burst this bubble.
Critiquing Some Labor Policies
Franking Credits
The system of Franking Credits is an innovative approach to avoid double taxation for Australian investors. It was introduced by a previous ALP government. It had the significant benefit that overseas investors in companies of all kinds were no longer better treated than local investors (since overseas investors are only taxed at a notional rate on dividends and interest earnings). The outcome of the ALP’s tinkering could have been the beginning of the end of this scheme in its entirety, a result in which Labor’s class-war warriors would have rejoiced, urged on by the Liberals’ hard-right “free trade” faction. A plague on both their houses!
Negative Gearing
The system of negative gearing for housing investments has been a thorn in the side for taxation system designers of all political persuasions. A previous ALP government tried removing it, but had to unwind the change because it immediately caused property rents to increase. Undeterred, ALP’s Bowen planned to try to do this again. The problem with this plan is that rents provide a very poor return on residential property returns, with the shortfall made up by immediate tax deductions for the loss on property investments and the hope of future capital gains. Ignoring the likely adverse outcomes of a policy platform is not recommended.
Capital Gains Tax changes
There is a fairness aspect to the Capital Gains Tax discount and there is an economic incentive aspect. The fairness aspect relates to the “lumpy” nature of capital gains since, for individuals selling a business and receiving a capital gain, this could be a once-in-lifetime event. In this case, taxing at the full marginal rate of tax applicable in that year would be unfair. Even though averaging could be introduced at this point, there is a more important element that should be included when considering capital gains taxes. This relates to the nation’s need for capital investment and capital accumulation in order to maintain the nation’s prosperity into the future. Encouraging investment via the capital gains discount should help to build up the nation’s capital; even negative gearing also serves this purpose. At present, Australia has a problem with insufficient capital investment. The need for more investment is a matter that does not appear to have been considered by the ALP when proposing to reduce the capital gains discount and their changes to negative gearing. While their proposals had a ready audience among those who do not invest for the future, the ALP has no excuse for not putting national interest ahead of a “cheap win” in these matters.
Conclusion
Scott Morrison is to be congratulated for running an effective campaign, highlighting some of the inadequacies in the “bold agenda” put forward by Labor. It is now up to the Prime Minister to lead a government that really does work for all the people, not just for those who voted for the Coalition.
