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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

a flawed growth scenario? « Previous | |Next »
May 14, 2013

An incoming Coalition is committed to the politics of austerity, given its economic mantra of “stop the taxes” , "cut the debt" and only run budget surpluses always. It is also committed to the supporting multinational capital--- Big Miners, the coal industry and the fossil fuel companies/generators--- by rolling back the mining tax and restricting renewable energy. They also plan to cut back the taxation on corporate profits and personal income.

This is part of the decade-long fierce fight-back by the conservative right, especially in the Anglo-Saxon world against what it sees as environmental socialism.The Coalition's option is to adapt to climate change rather than give in to "socialism" to prevent it.

RoweDbusinessteat.jpg David Rowe

This, it is claimed, will prevent from Australia becoming an economic basket case like Greece, and this, in turn, will also ease the cost of living pressures on those living in suburbia thereby enabling them to have an easier life. So there will be austerity for the populations to bring national debt under control and a pro-growth strategy based on dig baby dig. This represents the end of rising energy prices and squeezed living standards.

Coal has a brilliant future. The good times are just around the corner. Self-organising markets and business, with minimal public intervention and oversight, are the route to wealth generation, prosperity and jobs.

There's a possible alternative scenario within thee self-organizing free market. Here's possible alternative scenario. The world's top 200 fossil fuel companies are currently valued at $4trn, with $1.5trn of debt. That valuation implies they would burn all their carbon reserves, increasing global temperatures by at least 6C, with untold consequences for life on Earth. So the current valuations and business strategies could be self-defeatingly irrational – and $4trn of value could be suddenly halved.

What happens if China and India start cutting back on their use of coal to generate the energy for their economic development because coal pollution makes their cities unbearable to live in? That would mean them buying less imported coal from Australia. Doesn't that put constraints on the plans of Clive Palmer and Gina Rinehart to construct Australia’s biggest ever coal mines and billions of dollars of associated infrastructure in Queensland around the Galilee Basin?

Wouldn't that mean it becomes more difficult for the coal miners to obtain the finance for their capacity expansion and that their coal assets (eg., coal export terminals, mines and railways in Queensland and NSW). What if the power generators are unable to raise raise capital to build new plants. Doesn't this scenario mean stranded assets?

So you can see the Coalition's gamble. They are betting on China and India's ever increasing demand for Australian coal due to their ever expanding reliance on coal until 2050. Yet the market for coal is not looking good as India and China increase their wind and solar capacity by putting ever more incentives behind solar, wind, gas and nuclear.

What if coal fired power stations are retired and no new coal fired power stations are built? Doesn't that mean a limited rise in the price of coal. Australia would be the hardest hit of any coal exporters because, as the Big Miners tell us, it has the highest marginal cost. What then, is the price per tonne which the coal miners need in order to ensure that their big projects are profitable?

$87/tonne? The price reached $10/tonne in February 2013. It fell to $93/tonne in April. The trajectory is down.

| Posted by Gary Sauer-Thompson at 12:23 PM | | Comments (7)
Comments

Comments

CO2 levels have passed 400 ppM for the first time. Governments have said the limit should be (450ppm)-- the level beyond which catastrophic warming is thought to become unstoppable. Scientists are saying that we should have stopped at (350ppm). At the beginning of industrialisation the concentration of CO2 was just 280ppm.

The power of the fossil fuel companies is great-- they are digging for more coal in Australia and drilling ever deeper for oil in their off shore operations.

George Monbiot says that last week the European emissions trading system died.

It was supposed to create a market for carbon, whose escalating price would force companies to abandon fossil fuels and replace them with less polluting alternatives.

The scheme collapsed after the European parliament voted against an emergency withdrawal of some of the carbon permits whose over-supply had swamped the market.

Why were too many permits issued? Because of the lobbying power of big business. Why did MEPs refuse to withdraw them? Because of the lobbying power of big business.

"the fossil fuel companies are drilling ever deeper in their off shore operations."

In Australia the oil and gas industry is drillingalong the Queensland coast beside the Great Barrier Reef

Stock markets worldwide are cumulatively valuing coal, oil and energy companies' huge reserves of fossil fuels as if they will all be burned, even though, at best, only 40% could ever be used if the world is to cap the increase in global temperatures by 2C this century.

There is either a carbon bubble with investors and companies wildly over-speculating on the value of owning fuel reserves that can never be burned, or nobody believes there is the remotest chance that the world will stick to the limits on fossil fuel use congruent with containing global warming.

Take your pick.

I think it quite sad, all this denialism about science. Most of it starts in America and infects the rest of the world, but it has the same value of Canute putting up his hand and beckoning the ocean to retreat.
The FTA being negotiated between Cameron and Obama "empowers" corporations over local concerns (think gas fracking?).
Private gain; public headache down stream as to environment.

Back to the topic, the last sentences yield up the truth, that mainstream politics remains terribly straight-jacketed mentally.
Do we not even contemplate hedging the fossil fuels bet with some work on renewables?
Ever since the eighties,the main parties have dreaded the word "alternative" with an anxiety and loathing that defies rational thinking and confounds onlookers.