Tuesday, 14 October 2008

Climate Change, Peak Oil and the Meltdown

Some people are already talking about how mitigating climate change is a luxury that will have to await recovery from the economic meltdown. That is loser talk. Governments at least in countries with sound economic management that haven't run up massive debt can and should look at this as an opportunity for long-term infrastructure spending. And what better way to plan for the future than to reduce the future impact of higher energy costs and climate change mitigation?

Here are a few ideas for consideration. First, funding efficiency drives will gear the economy for future competitiveness.

Another idea is to fund free solar hot water for 100,0000 and free solar power for 40,000 low-income households (each at a cost of about $400-million); both would generate jobs and save poorer people money. Why is this a better idea than existing Australian state and federal rebates? Because there rebates cause no downwards price pressure; the price rises to whatever the market will bear. I've seen solar water heaters in South Africa for sale at less than the post-rebate price in Australia. If the government buys a large number of systems and pays for installation, the vendors will build economy of scale, then have to drop prices to continue with that scale in the broader unsubsidized market. To me this makes more sense than an ongoing price subsidy, the effect of which is to keep prices high.

Of course "free" doesn't mean no one pays for all this; it comes out of our taxes. But the same is true of roads, the vast majority of which don't have tolls. Building roads contributes to carbon emissions yet somehow "free" roads are acceptable to some, where a plan like this is seen as somehow wrong because someone is getting something for nothing. I wonder, do the same people argue that you can't mitigate climate change because the poor will suffer the most from extra costs of energy?

The government should support development of sustainable biomass and wind turbines on farms. Measures here could include direct subsidies and decent feed-in tariff policies for supplying clean energy to the grid. Both interventions would generate an income stream for farmers, reducing the pain of higher energy costs for their operations. Good for the environment, good for the economy. There are some interesting biofuels options out there. Legumes for example do not need nitrogen fertilizer. Peanuts are one of the oldest sources of biodiesel; better still are legumes that grow on land unsuited to food crops, such as the Pongamia tree.

Improved urban public transport should be another priority. Again, it creates more jobs, is better for the environment and reduces the impact of high energy costs on those on lower incomes. Add to this putting more services into outer suburbs to cut travel distances. Again good for the environment, good for the economy, good for those on low incomes.

Better inter-city rail is a longer-term project. But why not start planning now? What will we do when air travel becomes prohibitive? Already, fast trains are competitive in time for travel up to 1,000 km, allowing for the inconveniences of getting to and from airports and on and off planes. Europe and parts of the Far East already have this infrastructure; countries like Australia and the US need to catch up, otherwise they will be severely disadvantaged in sectors of the economy where medium-range travel is a significant cost.

All of this except the inter-city rail project that would be a longer-term project could be funded for less than the $10-billion the Rudd government is pumping into the economy mainly by cash handouts, as their response to the worldwide economic meltdown.

We have had a brief breather from high oil prices thanks to the financial meltdown, but don't expect it to last (prices are already heading up). Oil is not made by melting down markets ...

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