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In a recent paper we modelled the likely futuresupply limits of fossil fuels, and when wemight expect to reach “peak” fossil fuel.

Our “best guess” was that global fossil fuelproduction may peak as early as the mid2020s, driven by the peaking of coalproduction in China. We argued that this willincreasingly make alternative energy(renewables and nuclear) a strategic pathwayfor Chinese energy and economic security.

In turn this may see China pressuring forincreasing global emissions reductions toboost exports from its alternative energymanufacturing industry. This could tip thebalance in future international climatenegotiations.

In Australia the story is very different.Domestic oil production is collapsing.However, gas and coal resources are abundantenough to service strong export growth past mid-century (although not enough to provide forChina’s future energy demand).

The Chinese case exemplifies that action on climate change can be a “no regrets” policy when itcomplements efforts to improve energy and economic security – that is, when a policy helps dealwith all three challenges. Because their fossil fuel reserves have or are peaking, both the EU andChina will improve energy security by switching to domestic alternative energy production. Theywill also improve economic security by avoiding economic leakage through large energy imports.

With our large coal and gas export industries the immediate “no regrets” options for Australiamight seem elusive. But Australia needs to prepare for a possible tipping point in alternativeenergy production, and global climate agreements that may affect our coal and gas exports.

Australian fossil fuel resources

Our work has looked at the geological limits to fossil fuel production assuming no global actionto limit emissions and no breakthroughs in alternative energy technologies.

Obviously people are working hard on both of these important issues so consider our modellingbelow as an upper limit of what Australian fossil fuel resources are capable of rather than aforecast of actual production.

Four ways to boost Australia's economy that can helpthe climate10 March, 2015 Gary Ellem, Damien Giurco, James Ward, and Steve Mohr 0 comments

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1 of 5 2015/04/08, 5:43 PM

Projections for Australia’s fossil fuel supply. Gary Ellem

Summing up Australia’s fossil fuel resource availability:

Oil – Poor. Domestic conventional oil production has peaked and we are increasingly importdependent. The growing scale of imports mean that we are basically selling coal to buy oil.Alarmingly, Australia also lacks adequate short term stocks to ride out supply disruptions.

There are substantial kerogen oil resources in Queensland but these are unconventional and areat the expensive and emissions intensive end of the spectrum. Production is currently at thedemonstration plant level, so any production of such oil would be starting from a standing startand could take decades to grow to appreciable scale.

Gas – Good but no longer cheap. We have enough conventional and unconventional resourcesto support a growing LNG export sector, provided international gas prices remain strong.Domestic prices are likely to increasingly reflect international prices.

Coal – Abundant. There are enough black coal resources in New South Wales and Queenslandto support export growth of this dominant export commodity for another few decades and thevast brown coal resource in Victoria has barely been tapped.

These assessments are purely of the resource scale and do not involve an assessment of localimpacts to communities, land, air, water that must also be integral to extraction approvallicencing.

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Australia’s coal resources. Geoscience Australia, CC BY

Coal puts Australia in a tight spotThe strategic situation for Australia in terms of energy and climate is complicated by theabundance of our low cost coal reserves. These not only provide the bulk of low cost (providedemissions are not considered) power in our electricity network, but along with gas form the basisof two significant national export sectors.

The poor progress of carbon capture and storage technologies on delivering a low cost,workable and safe way to eliminate emissions from fossil fuel power stations means that thegrowth of coal and gas would seem at strategic odds with efforts to reduce carbon emissions.

To Australians then, climate action equals a cost to energy and the economy. This makes itchallenging to develop policy with the full support of the Australian public.

We should be kind to each other in this ongoing discussion. There are strong and legitimatearguments from those that prioritise climate action and those that prioritise national energy andeconomic security, neither of which are likely to disappear in the short term.

Developing a bipartisan strategy for Australian economic, energy and climate security will bedifficult if we continue to focus on areas that are trapped in this strategic “climate vs economy”conundrum. To get anywhere requires long term policy commitment that will last throughsuccessive governments of all persuasions.

To try a different path, we’ve used our knowledge of Australian fossil fuel reserves to suggestfour “no regrets” policy areas that can benefit climate, energy and economic challenges alltogether.

1. Become a leader in smart transportAustralia’s dependence on the private passenger car is now a strategic economic, energy andclimate security weakness and will cost us in the ballpark of A$1 trillion in car and oil importsover the next 10 years.

This economic leakage is reducing GDP growth by 4.5% with a subsequent opportunity cost ofapproximately 500,000 jobs across the economy.

Australia could and should be a leader in dramatically reducing car and oil imports. Onetechnology that can do this is driverless electric cars. Companies such as Google and Uber arevying to be the first to offer a low cost driverless transport service that can give you betterservice than the private car.

Electricity is a lower cost and more easily managed energy source for driverless transport, sodriverless share cars will likely drive the rapid uptake of electric vehicles.

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Along with a railway backbone for high density corridors and longer trips, this could reduce carownership and oil consumption (and hence imports) by up to 90% and lay the foundation foremissions reduction through low-carbon electricity.

2. Greener miningThe long term future of Australia’s coal export sector is fundamentally uncertain at this point. IfChina manages to pull off its alternative energy switch, they will lay the technology and industrialfoundation to replace our export markets, or at least crash the price by providing a low costalternative.

It’s not helpful to see this as a debate between coal v cleantech (cleantech includes renewableenergy technologies and accompanying technologies such as smart grids, electric vehicles andenergy storage). Strategically-speaking, it would be better to look at what value cleantech canadd to coal and other mining activities.

At the moment much of the revenue received from mining bounces back out of the country againto pay for oil and technology imports – much of it used to conduct the mining process itself.

By greening the mining supply chain (for example through biofuels, automation,electrification with renewable energy, greener explosives) more of the costs can be capturedlocally, supporting both mining supply chain and cleantech industry development.

This could be supported through the federal government’s Mining Equipment Technology andServices Growth Centre. Strategically this means a higher national return from any future coaland other mining exports, and a guarantee that it supports cleantech industry development.

If we are smart we will use the international market connections and knowhow of our miningsector to support cleantech exports, which will become increasingly essential if export coaldemand crashes.

3. A renewable gas targetThe current renewable energy target is really a renewable electricity target. This neglects thelong term future of Australia’s gas network and misses opportunities for agricultural regions toenter into the Australian energy sector.

A renewable gas target would represent a strategic plan to develop Australian biogastechnologies and agricultural energy supply chains in regional Australia. It would also supportconsumer choice for gas as a renewable energy option, especially in distributed tri-generation.

Connecting renewable gas targets to unconventional gas projects would ensure better regionalvalue-adding and the processing infrastructure for a continued regional biogas industry thatendures long after local gas wells have gone into decline.

4. Doubling energy productivityImproving energy productivity is an essential part of increasing economic productivity andimproving energy security.

Australia is falling behind on improving energy productivity. By contrast, the USA has adopted atarget of doubling energy productivity by 2030.

Increasing mandatory energy efficiency standards make the job easier for the consumer byeliminating poorly-designed products and processes in addition to spurious advertising.

Given our rising oil imports costs, it is in Australia’s strategic interest to take action to drasticallyreduce our fuel consumption in passenger and freight transport.

How Australia can dramatically lift its energy productivity across industry sectors is beingexplored in the Australian Energy Productivity Roadmap.

Can you suggest more? We’d love to hear your thoughts.

Further reading:

Peak fossil fuel won’t stop climate change – but it could help


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four ways to boost australia's economy that can help the climate | mining australia.pdf

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