China, Carbon, and the Carbon Tax

This week’s Australian budget, with its withdrawal of subsidies for renewable energy, has left many commentators wondering if we’ve turned our back on carbon-neutral power. They should focus on the main game – the introduction of a carbon tax later this year. Without this, our renewable industry really will be left behind.

A typical Australian climate “skeptic” like Andrew Bolt or Alan Jones tends to ask: if Australia only emits just 1.5% of the world’s carbon emissions why should we bother with a carbon tax?

But focusing on emissions, morals or the environment misses the most important element in introducing a carbon price and supporting renewables: the economy.

China: doing a lot more than you think

Many people point to China’s supposed inaction on carbon emissions as a reason we shouldn’t act. The disparity between what we think is happening in our biggest trading partner and what is really happening is enormous.

Yes, if you visit, there is a lot of smog. Yes, they have a lot of old coal-fired power stations.

But what about new energy investment: what are China’s trends towards the future? The numbers are truly stunning.

During 2009, China built 37 gigawatts (GW) of carbon-neutral energy (excluding nuclear) according to UN energy finance report figures. Those new forms of energy include hydro, wind, solar, geothermal and biofuels.

For just a little context of how much 37 GW is: the energy from all of Australia’s 29 coal-fired power stations adds up to about 29 GW. So China built 30% more carbon-neutral renewable energy capacity than all of Australia’s coal-fired power stations in just one year.

That is the largest growth in the world by far.

China added 14 GW of wind power alone in 2009. And for the first time ever, renewable energy capacity in China is expanding faster than coal.

Chinese officials revealed that by the end of 2009 there was 178 GW of new energy under construction: 96 GW were renewables and 80 GW were from coal.

There’s a price on carbon whether we like it or not

In Europe and the US, renewable energy capacity has outstripped fossil-fuel growth for a number of years. But China’s clean energy growth was 53% during 2009 and made it the worlds leading investor in clean energy (US$35billion) with nearly double the amount of the United States (US$18billion).

These hyper-growth trends in carbon-neutral energy in China point to the obvious fact that a “secret” or shadow carbon price is in effect.

The secret carbon price is also taking shape beyond China with 78 GW of renewable energy being built during 2009 around the world. Global new investment in clean energy (solar, wind, geothermal and biofuels) outpaced fossil-fuels (coal, gas) by some 30% in both 2008 and 2009.

It seems the last couple of years have marked the end of the old polluting industrial revolution and the dawn of a new clean, green industrial revolution. This has occurred without a formal carbon price in China or the US.

Coal can only hold us back

So what’s causing this immense global clean industrial revolution? Isn’t there a grand conspiracy among climate scientists to lie to the world? And didn’t Copenhagen end in failure?

Very simply, there’s more wealth and opportunity in cleaning up the world than polluting it. This is the economic argument laid out in my book “The Clean Industrial Revolution: Growing Australian Prosperity in a Greenhouse Age”.

It’s no wonder that President Obama proclaimed to the world in his 2010 State of the Union speech “the country that will lead the global clean energy economy will be the one who will lead the global economy”.

So why should Australia “look beyond coal” as Chairman of BHP Mr Kloppers suggested recently?

Very simply, although coal is Australia’s biggest export today it’s unfortunately a product ill-suited for the 21st century global economy. As Bill Clinton said, “The stone age didn’t end from lack of stones”.

Australia is squandering the opportunity to move towards a clean, low carbon prosperous economy by delaying the introduction of a carbon price and being locked in to a coal addiction that will expire in the medium term as the world moves to cleaner, better fuels and technologies.

A carbon price will move us out of the “typewriter age”

China doesn’t need a formal carbon price to move its economy, since it has Beijing to direct the flow of clean energy investment into the provinces as it has done in 2009.

But we in Australia don’t live in a planned economy, we live in a market-led liberal democracy where a carbon price/tax is the only way to meaningfully shift the economy at least cost.

A carbon price like the one in New Zealand or Britain will promote innovation towards commercialising clean technology to supply domestic demand. This will improve a country’s comparative advantage in supplying and exporting the new clean technologies that the world will continue to crave.

The race is on globally and Australia is currently exporting typewriters to a global economy moving quickly towards computers.

You can think of climate change as some grand conspiracy among thousands of scientists, but you can’t doubt the massive economic shift going on in China and the world towards a Clean Industrial Revolution. That’s why even people like Andrew Bolt or Alan Jones should support a carbon price.

(A shorter version of this article first appeared on The Conversation on 12 May 2011. It has been updated for posting here)