Australia’s Fossil Fuel Export Trilemma

Australia’s fossil fuel exports are incompatible with the Paris Climate Agreement targets, forcing the world into a trilemma between climate chaos, stranded assets and unjust climate action.

[This is a longer version of a piece which appeared in Renew Economy]

Australia has been ranked as the worst-performing country in the world on climate action. According to the recently released Sustainable Development Goals (SDGs) Index, years of delay, inaction, and fossil fuel promotion have taken Australia to dead last if we take into account domestic GHG emissions; emissions embodied in goods consumed; climate vulnerability; & exported emissions from fossil fuel exports.

In addition to having one of the highest (and rising) per capita domestic emissions in the world, one of the reasons why Australia has fallen so far in global rankings is that the SDG Index is now taking into account “spillover” effects that countries have on other nations’ ability to meet the SDGs. These effects may be positive, such as Australia’s (far too small) contribution to the Green Climate Fund; or negative, such as exporting polluting fossil fuels.

As the world’s largest coal exporter and 4th largest liquid fossil gas exporter, Australia’s fossil fuel exports have put it deep into the negative ledger for spillover effects. Australia’s annual exported CO₂ emissions are 44 tonnes per person, greater than even Saudi Arabia’s 35.5 tonnes per person, and much larger than the US’ 710kg per person. Just Australia’s coal exports account for 3.3% of global emissions, despite the fact that Australia makes up just 0.33% of the world’s population.

Australia should take moral ownership of the harm caused by its outsized export footprint and align its economy with the Paris Climate Agreements it has signed up to. Instead, Australia’s federal government seems intent on doubling down and opening up an extensive raft of new coal mines and fossil fuel projects across the country. The world, however, simply cannot afford for Australia to continue on such a path.

Research shows that emissions just from the oil, gas, and coal to be extracted from already-developed fields and mines would take the world beyond 2°C of warming above pre-industrial levels, and way beyond the more stringent and much safer target of keeping it to 1.5°C. We already have more fossil fuel reserves than we can afford to burn, yet Australia wants to add millions of tons more of the most greenhouse intensive fossil fuel to the mix. By doing so, it is forcing the world increasingly into a trilemma where it must choose between 3 deeply undesirable options or some combination thereof:

A. the world burns all those fossil fuel reserves, pushing passed the Paris Climate Agreement targets, plunging us deeper into climate chaos;

B. the world acts on climate change, and much of Australia’s fossil fuel projects end up becoming stranded assets, thus leaving communities and workers stranded too; and/or

C. the world acts on climate change and other countries are forced to leave more of their fossil fuels in the ground to compensate for Australia’s increased fossil fuel exports.

Options A and B, futures defined by climate chaos and stranded assets, are clearly undesirable for the climate and for fossil fuel dependent communities respectively. Fossil fuel companies in Australia might prefer option C, where Australia gets to increase its fossil fuel production forcing others to leave theirs in the ground. However, there are three major reasons that is a deeply undesirable option too, namely, it is economically efficient, it would undercut emission reductions efforts elsewhere, and it is unjust.

Firstly, Australia expanding its coal exports is simply not economically efficient. As research in the journal Nature shows, for the world to efficiently meet even a weak 2°C target, Australia would have to leave 90% of coal reserves in the ground. This is because winding down coal power is one the most cost-effective forms of climate action, such that burning Australia’s coal is simply not an efficient use of our remaining carbon budget.

Secondly, following the economics of supply and demand, increasing coal supply reduces the global price of coal, which means lower returns for other coal producers and a harder time reducing emissions as cheaper coal undercuts clean energy. Whereas China and Germany have created a virtuous cycle by deploying solar and wind and bringing down the costs of the technology for everyone, Australia is putting pressure in the opposite direction. By increasing coal supply, they are bringing the global cost of coal down, thus making it economically harder to transition away from coal, as cheaper coal undercuts other alternatives. As research by Fergus Green and Richard Denniss puts it, to effectively act on climate, you have to “cut with both arms of the scissors”, reducing supply and demand. Unfortunately, Australia for the most part is cutting with neither.

Increasing coal supply and reducing coal prices will also negatively impact other coal producers, as the lower cost will mean other coal producers will have lower profit margins. For instance, according to a report from Wood Mackenzie, the limited jobs in Queensland from Adani would come at the expense of mining jobs elsewhere. In a report for the Infrastructure Fund, it found coal-producing basins in NSW and southern Queensland would cut their production by more than a third, due to a drop in coal prices, if Carmichael opened.

Thirdly, Australia expanding its coal is also inequitable. As a rich developed nation that has benefitted disproportionately from fossil fuel burning and extraction, and who can most afford the transition away from them, Australia has a moral responsibility to lead in leaving fossil fuels in the ground. If Australia and other similarly positioned countries, like Norway, Canada, Germany, and the United States do not act, it shifts the burden onto countries who can least afford it, and who have contributed much less to the climate problem (whether through fossil fuel emissions or extractions).

As the world’s largest coal exporter, Australia has already shifted that burden greatly onto others by taking up much more than its fair share of the fossil fuels we can afford to burn and extract if we are to meet the Paris Climate Agreement target. Increasing the burden on others through increasing its fossil fuel exports would be unjust. Just the coal in the Galilee basin, which Adani aims to open up, would use up one-third of the remaining budget to keep warming to 2°C and much more of the smaller budget left to hit 1.5°C.

Like the Norwegian government, Australia might object that under the UN Climate Negotiations, their responsibility is just to reduce domestic emissions, not fossil fuel exports.[1] Such an objection would ring quite hollow from Australia given that they are not even meeting and just jettisoned their incredibly weak domestic emission reductions targets — targets the Australia Institute has ranked as being deeply inadequate and unfair contributions to meeting the Paris Agreement targets on any recognized approach to justice.

Additionally, just because the UN does not currently count fossil fuel exports as part of a country’s official responsibility, does not mean that it should not be doing so — it can and it should. In the end, if we are to avert increasingly catastrophic climate destabilization, then the world needs to leave fossil fuels in the ground regardless of whether the UN officially counts it or not.

Fortunately, countries around the globe are beginning to act, with Belize, Costa Rica, France, New Zealand, and Denmark all having put in place moratoria on new oil and gas exploration, and even China has been curtailing domestic coal production. It’s long past time Australia joined them and committed to no new fossil fuel extraction and the gradual phase down of exports in line with an equitable approach to meeting the Paris Climate Agreement targets. If it doesn’t, Australia will be forcing the world into a deeply undesirable trilemma choosing between climate chaos, stranded assets & unjust climate action.

Labor’s Inadequate Response

The closest that Labor has arguably come to a policy aligning fossil fuel exports with climate action, is a suggestion put forward by Labor’s Shadow Minister for Climate Change and Energy Mark Butler. Butler proposes that Australia should align its resource planning with the International Energy Agency’s 2°C scenario.[2] On the face of it, that may seem like a responsible way to align Australia’s exports with the Paris Climate Agreement, but the devil lies in the details.

The first thing to note about the Butler’s chosen IEA scenario is that it aims for a 50% chance of keeping warming to 2°C above pre-industrial levels. The Paris Climate Agreement, however, did not say that we should flip a coin with hitting 2°C, rather it said we should stay “well below” 2°C, and aspire to hit the much safer 1.5°C target. The difference between flipping a coin with hitting 2°C as per the IEA scenario and staying well below 2°C would have major repercussions for Australia and the rest of the world.

Research compiled by Climate Analytics, suggests that limiting global warming to 1.5℃ rather than letting it reach 2℃ could make a significant difference to the severity of extreme weather events in Australia. Heatwaves in southern Australia would be an average of five days shorter. In the north, hot spells would be 20–30 days shorter than the 60-day heatwaves potentially in store if warming hits 2℃. Under 2℃ warming, the world’s coral reefs would have a “very limited chance” of survival, whereas limiting warming to 1.5℃ would allow “some chance for a fraction of the world’s coral reefs to survive”.

Thus, Butler’s proposal aligns Australia with a pathway that spells the likely death of the Great Barrier Reef, along with so many other major impacts for Australia. It also goes against the will of small island states, Least Developed Countries and the majority of the world’s governments, who have long demanded that we keep warming as close as possible to 1.5°C as we can. Their demands are built on the justified fear of the devastating impacts that each bit of warming above 1.5°C brings, impacts which fall disproportionately on the world’s most poor and vulnerable.

Another problem with Butler’s aim to use the IEA 2℃ model, is that IEA models sneak in a range of problematic modelling assumptions which unduly inflate the future role fossil fuels play. Their scenarios assume a huge role for both fossil fuel carbon capture and storage and negative emissions, both of which are unproven, uneconomical and/or risky technologies to capture and store CO2. Assuming huge amounts of these technologies allows the IEA to give fossil fuels a much bigger role in the future than it deserves by unethically gambling the future of the planet on unproven technologies to remove fossil fuel emissions in the second half of this century.

Finally, the IEA scenario as an economic model is based on (a fossil fuel-friendly version of) economic efficiency, not on climate justice. However, as discussed earlier, Australia as one of the world’s largest polluters and wealthiest nations, has a moral responsibility to lead, not just to follow what is economically efficient. As such, Labour’s plan arguably should go beyond mere economic efficiency and incorporate consideration of justice and equity which would lead to more ambitious action.

Rather than aligning resource planning with a problematic IEA scenario as Butler suggests, Labor would do well to heed the advice of the Labor Environment Action Network (LEAN) who in In April 2017 drafted a policy for the party to follow, which would put a ban on any public funds being used to subsidise the fossil fuel industry and shift communities reliant on mining into other industries.

However, to truly act in line with the Paris Climate Agreements, Labor would have to go further and emulate the Greens. They are the only political party in Australia whose policy gets close to what it would mean to truly align Australia’s fossil fuel exports with the Paris Climate Agreements. They propose, among other things, a ban on new fracking, coal seamed gas, or thermal coal mines or expansions, alongside a planned phase out of fossil fuels and a just transition for affected communities. Such a pathway is what is needed to bring Australia’s fossil fuel production in line with the international targets agreed to under the Paris Climate Agreement.

The Greens, unfortunately, are far from gaining enough power in Australia to determine fossil fuel export policy. And so, Australia’s fossil fuel export trilemma is an elephant in the room that the current Australian political leadership is only making worse as they ramp up more fossil fuel production. From a raft of new proposed coal mines in Queensland and New South Wales, to opening up fracking in the Northern Territories, Australia is pushing the world deeper into an undesirable trilemma between climate chaos, stranded assets, and unjust climate action.

Alex Lenferna served as an Endeavour Research Fellow at the UNSW Practical Justice Initiative, and is a Fulbright Scholar and PhD Candidate at the University of Washington Department of Philosophy.

[1] According to the UNFCCC guidelines only ‘greenhouse gas emissions and removals taking place within national territory and offshore areas over which the country has jurisdiction’ (Eggleston et al. 2006: 1.4) are included within that country’s carbon budget. This excludes fossil fuel exports.

[2] Butler proposed this approach both in a speech on the topic at the Sydney Institute and in response to a question by the author at a Labor Environmental Action Network meeting.

Alex Lenferna is secretary of the Climate Justice Coalition & campaigner with 350Africa.org. He has a PhD on climate justice from the University of Washington.