Should Australia subsidise clean coal?

In the last week clean coal has been back in the news with energy minister Josh Frydenberg looking to Japan as an example for Australia. Since the Fukushima disaster Japan has replaced most of its nuclear capacity with new clean coal/ low emissions technology. With much of Australia’s existing power infrastructure due for replace, its large coal reserves and the relative infant state of renewable energy technologies clean coal seems like the perfect solution to Australia’s energy problems. But, is clean coal just a pipedream? Should Australia be subsidising it?

Australia has set the goal of reducing its emissions to 26-28 per cent on 2005 levels by 2030. Since the repeal of the unpopular carbon tax Australia’s primary method of achieving these reductions has been a 23.5% renewable energy target by 2020. In addition to this various State governments have set even more ambitious RETs such as Queensland 50% target by 2030. Due to both price and reliability concerns this has proven to be highly controversial with many claiming the RET will damage Australian industry.

 

Clean coal or new generation low emission coal power plants seems like an easy solution. However the University of Melbourne claims that replacing Australia’s existing coal power plants with new generation low emission plants would cost $62 billion dollars. Renewable energy would according to the university only cost $24 billion. The advocates of clean coal would argue that these figures are inaccurate and that renewable energy would also require significant upgrades to the energy grid to provide energy security.

At present current subsidies to renewable energy in the Australia add up to $5 billion per annum and will increase if Australia is to meet its renewable energy target. These subsidies have resulted in considerable distortions in Australia’s energy market making the wholesale price of renewables ‘cheaper’ than traditional baseload power resulting in the closer of older coal power plants such as was seen with Hazelwood brown coal power plant. In the case of South Australia this resulted in that state relying on the importation of coal power from Victoria and reliance on expensive gas power when renewables haven’t been able to meet demand. The overall result has been increased power prices and damage to the South Australian industry.

Australia’s experience with renewables should be warning of what happens when governments interfere with markets and pick winners. As is constantly claimed by renewable energy advocates the price of renewables continues to drop and their competitiveness continues to increase. In many situations wind and solar maybe the best option to replace aging power plants. This however should negate the arguments for subsidising them. The same is true of clean coal if it truly is the best option it should not require government subsidy.

The Austrian economist Friedrich Hayek warned of the local knowledge problem stating, “Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place.” When Hayek said this he was arguing against central planning the scientific planning of its day. Energy policy in response to the challenge of climate change is the central planning. Just as the socialists of the 20th century thought markets were too messy and imperfect today’s experts think they can plan energy policy more effectively than the free market.

Whether these experts are advocating clean coal or renewable energy they are wrong. Australia’s energy future will have no single solution, it will be a mix of new technologies, efficiency gains and the continuation of old solutions were appropriate. Those best place to make the decisions are those with the local knowledge. It will come from thousands of investors weighing risk and determining the best solution. Where solar makes sense it will be solar, where wind it will be wind and where coal it will be coal.


Josh Frydenberg, Richard Di Natale or the University of Melbourne don’t possess the local knowledge to plan Australia’s energy future – this knowledge is held by thousands of dispersed people investing in the energy network. The Australian government can help by getting out of the way by repealing its renewable energy target and by letting local knowledge prevail.

Justin Campbell is General Manager of LibertyWorks Inc.

 

16 Comments on "Should Australia subsidise clean coal?"

  1. Easy answer, no. As should be the case with all forms of generator, and industry and agriculture in general.

  2. I agree with Paul Bickford. No. Get Government completely out of Energy, foster the creation of the free market, and let the Market take it’s course to cheap, clean and effective energy.

  3. No. There should be no subsidies on any energy source. There should be no extra taxes on them either.
    Cheap, reliable energy is the foundation of our society and fundamental to our wellbeing.
    CO2 is the most important nutrient on the planet and fundamental for the existence of life. Any and all attempts to demonise this trace gas isn’t just an attack on humanity but on life itself. There is not a single piece of credible evidence to suggest that CO2 can cause any change in planetary temperatures or be detrimental in any way shape or form to humans or other life over the next 1000 years. Plants thrive best at 4-5 times current atmospheric levels and complex life evolved at 10 times current levels.
    Renewable energy is an economic and environmental boondoggle, something which would be abundantly clear if market forces, instead of brain dead politicians and bureaucrats, were allowed to choose what energy sources we used.

    • Fun fact doesage makes the poison. This applies to everything including carbon dioxide which is something people smarter then you realise we need to curb to safe levels (like lead in the water) if we want to keep our planet liveable for us

    • Fun fact. “Safe” levels for CO2 are anything below that found at your average rock concert which are up to 30 times higher than the air outside. “Optimal” levels would be that most conducive to plant growth which are 4-5 times current levels, which if (and it a bloody big IF) the increases of the gas in the last 150 years continue on the same trajectory will take another 600 years to reach.

  4. No Need to. .The whole world is after our high grade clean coal..it is cheap and effective and readily available. Just allow it’s use.

    • Didnt china already begin banning coal along with germany producing everything through renewables and india want more solar as it expands? You havent been paying attention

    • I think I have Tamaria. .China is building hundreds more coal fired power stations to meet demand for power for industries..cities and homes . India is doing the same. And both these Billion plus population each and massive industrial growth rates are looking to Australia for clean coal. As for Germany. . they stupidly closed their Nuclear Power Station to focus in Renewable Energy supply. In no time the grid couldn’t cope with demand and they have reopened the Nuclear Plant. We can sell best coal and Uranium and pay Labours debts . The Govt needs vision and guts … and they have neither.

  5. In 2016, the world burned 7 billion tons of coal and 35 billion barrels of oil. Basic commonsense would suggest the massive quantities of CO2 and other bi products released would have a significant impact on the atmosphere.

  6. Coal has always relied on massive Governmemt subsidies. End all government subsidies for energy generation and resulting cleanup, and bring it on. Renewables are ready to compete, and will bury the fossil fuel industry.

  7. If it is a new process, which is more efficient, and more friendly to the environment, then it should be subsidised. If it is okay to subsidise the relatively new process of Wind Powered Turbines, then it should be okay to subsidise the new clean coal process. Whats good for one, should be good to the other. This would be fair, rational and reasonable.

  8. Andre, I’d agree with you, if clean coal actually existed. As far as we know so far, it simply doesn’t. No clean coal technology has yet been proven. I’m happy to put some money into funding research into it (although certainly not at the cost of researching real clean, renewable energy) but frankly at this point after a decade of hyping it up it still doesn’t exist. Other clean energy sources are here now and constantly under attack by the same people who want to fund research into clean coal, so colour me suspicious

  9. No. Let’s not get into a bullshit argument about clean or dirty coal, let’s just be rational, and realise that coal fired energy is, for the moment, our best option. Renewables are a candy coated fairytale for children. They even have their own action figure – Elon Musk….

  10. The World has been heating up for the last 20000 years, coming out of a mini Ice Age. In that time places that were swamps (Sahara Desert) are now Deserts places that were Deserts are now Tropical Rain Forests (Central Africa) even the Amazon 800 years ago. The Tilt of the Earth (Wobble) & the position of Earth in it’s (non-Centric) track around Sun over thousands of years has a lot with what happens with the Earths Surface Temperature.

    That being said. How much CO2 is being put into the Atmosphere now compared to the times of the Industrial Revolution? Up until the 1950 Steam Trains were a dime a dozen & charging through the Suburbs making everyone’s washing dirty & pouring out CO2.

    An increase in CO2 will increase Plant growth & that will bring Rain, which will increase Plant growth, which will increase O2 (Feedback System).

    I do believe that new forms of Energy need to be introduced. At the moment we are at the Wright Brothers/Model T Ford stage of development of renewable Energy. Coal Technology will get better. New ways of using Coal will emerge. Renewable Energy will have false starts but will keep moving forward, as will Energy Storage.

    The Greenies will just have to have patience. It will happen eventually but not tomorrow or even overnight. Just to immediately shut down Coal is ridiculous & unrealistic. It would destroy the World Economy over night, if it were to happen the way the Greenies want it to happen.

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