Abbott swimming against the tide of history

The election of Tony Abbott as Prime Minister of Australia has been a long time coming. For those of us that care deeply about the need for action to limit global warming, it has been like watching a slow motion train wreck, with the bipartisan consensus for climate action strewn amongst the wreckage.

In his acceptance speech as Prime Minister elect, Tony Abbott declared, “Australia is open for business” and he made it clear that his first actions in the top job would be to abolish both the carbon tax and the mining super profits tax. Andrew Robb announced that the new Coalition Government would be re-starting the mining boom. It is as if the new Government will take us back to the good old days when foreign investment flooded to our shores and Australia had a clear place in the world as the quarry for the endless Asian growth miracle.

You can’t fault them for ambition or optimism but the tide of history might have other ideas. An awful lot has changed in the six years since a Coalition Prime Minister was last in the Lodge. Navigating a prosperous and safe course for the Australian economy is never an easy task, but it is made even more difficult when you are using an outdated map.

Abbott and co. seem to have failed to grasp the simple yet increasingly obvious reality that there is now a powerful and unstoppable structural shift that is underway in global energy markets. The clean energy revolution is happening – regardless of whether they want it to or not.

When John Howard so gracefully left the Lodge in 2007, Australia had roughly 8,000 solar rooftops. Now, the number has jumped to over 1 million. Over 2.6 million Australians from all walks of life (and from all sides of the political divide) get their energy direct from the sun. This in turn, has created over 16,000 jobs in the Australian solar industry.

For many, the decision to go solar comes down to simple economics. Solar power is the best way to isolate yourself from ever rising electricity costs. While electricity costs from our aging fleet of coal generators continues to rise, the price of solar continues to fall dramatically. In 2007, solar panels cost roughly $12/watt compared to less than $3/watt now – a fall of over 75%. This trend is set continue due to economies of scale and ongoing rapid technological innovation.

And Australians aren’t the only ones embracing clean energy. Only a few years ago it was common knowledge that the ‘resources super cycle’ was going to last forever with China and India buying as much Australian coal as we could dig up.  But it is now clear that China, despite its massive coal use, is slowly but surely making headway in the transition to a clean economy, driven in large part by politically potent health and pollution issues. And the Indian coal sector is in serious trouble because, in a nutshell, they can’t afford the price of imported coal.

Citi Group recently jointed a growing line of global banks including Deutche and Goldman Sachs in publishing reports describing the structural decline of coal, driven in large part by the actions of China. Perhaps the most compelling analysis is the recent Bernstein Research recent report titled “Asian Coal & Power: Less, Less, Less…The Beginning of the End of Coal”. In it, the authors note… ‘by our estimates, China will cease to import coal in 2015 and will see a decline in coal consumption in absolute terms in 2016…’.

It is clear that the world is changing. Coal is in structural decline globally with major implications for Australian coal exporters. Andrew Robb can’t just re-start a boom just by wishing it into being. Tony Abbott can rail against clean energy all he likes but at some point, economics will trump ideology.

Scrapping the carbon tax will no doubt set back Australia’s clean energy transformation. It will cost jobs, it will lead to more pollution and more health impacts from coal in the Hunter and Latrobe Valleys than would otherwise be the case. But not even Tony Abbott can hold back the tide of history.

We don’t use typewriters anymore either.

John Hepburn
Executive Director
The Sunrise Project

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