First published in the Courier-Mail on 26 March 2007
Clean coal is all hot air
Dr Alex Robson
Last month Federal Opposition Leader Kevin Rudd announced
Labor's National Clean Coal Initiative.
Roughly speaking, the term clean coal refers to various technologies
for removing carbon dioxide from coal when it is used to generate
electricity, both before and after combustion occurs. The term
encompasses carbon capture and storage technologies.
Rudd's policy commits $500 million of taxpayer funds on the
development of these technologies, with the proviso that each
taxpayer dollar must be matched by two private sector dollars.
Rudd also proclaimed that Labor would establish an emissions
trading scheme, set renewable energy targets, develop plans for
reducing greenhouse gas emissions, convene a summit on climate
change and ratify the Kyoto protocol.
Apart from ratifying an obsolete international treaty and
organising yet another Canberra talkfest, Labor's policy of subsidising
corporations, making grandiose plans and setting impressive-sounding
targets is eerily similar to existing Government policy.
The Howard Government happily boasts about Australia meeting
its Kyoto targets and has already set up a taskforce to examine
emissions trading schemes.
Its Low Emissions Technology Demonstration Fund has committed
taxpayer funds of $500 million for research, with the proviso
that each taxpayer dollar must be matched by---you guessed it---two
private sector dollars. Additional funding is planned for future
This subsidy is simply a form of taxpayer-funded corporate
welfare, with no discernible benefit to Australia in terms of
the effect on climate change.
Neither Rudd, Howard nor any other Canberra politician seem
to be willing to admit that none of these policies will have
any impact on global temperatures. Indeed, even if Tasmanian
Senator Bob Brown got his wish and shut down Australia's coal
industry overnight, it would not make a whit of difference to
So much for Rudd providing sensible policy alternatives. The
only real difference between the two spending initiatives is
that Labor will revert to its unhealthy old ways and explicitly
try to pick winners by directly focusing the subsidy on clean
coal technology. In contrast, the current government subsidy
is neutral with respect to the technology used to reduce carbon
These minor differences are simply political manoeuvring.
Labor is attempting to appeal to green voters, appease the coal
mining unions, and shore up votes in marginal coal-producing
electorates. But in the rush to get on board the clean coal bandwagon,
both parties seem to have ignored the Howard battlers---ordinary
taxpayers with mortgages and electricity bills.
When it comes to clean coal, there is a gigantic elephant
in the room. Although $500 million is a significant amount of
money to spend on corporate welfare, it is a drop in the ocean
compared with the higher costs of electricity generation that
are involved in the use of clean coal technology, and the effects
that these higher costs will have on consumer prices.
The vast majority (77 per cent) of Australia's electricity
is produced using black and brown coal. As Labor's policy announcement
acknowledges, CSIRO scientists have estimated that carbon capture
and storage technologies are not commercially viable (and will
not be for many years), and would effectively double the cost
of producing electricity.
It is also estimated that electricity prices could rise by
40 per cent.
There is no way that individual electricity producers will
voluntarily double their generating costs unless they plan on
going out of business.
Thus clean coal technology will not be adopted unless governments
force producers to use it, taxpayers directly subsidise it or
if an artificial price (effectively a tax) is placed on carbon
Forcing electricity generators to adopt this cost-doubling
technology is equivalent to imposing a 100 per cent tax on the
consumption of coal, without the government collecting any revenue.
Both parties seem to believe that such a policy will somehow
put the coal industry on a sustainable footing and protect coal
jobs. This is pure economic fantasy. Doubling the effective cost
of coal will likely lead to a significant reduction in coal demand
and significant job cuts in the coal industry.
Similarly, the idea that such large increases in consumer
electricity prices will not lead to higher inflation and higher
mortgage interest rates is completely divorced from economic
The only alternative is to shift the costs to the taxpayer
by directly subsidising clean coal electricity generation.
Inevitably Howard's battlers will end up footing the bill
for a bipartisan clean coal policy that will have absolutely
no effect on climate change. No wonder neither side wants to
acknowledge the elephant in the room.
* Dr Alex Robson lectures in economics at the Australian National