The last half century has seen the pace of change, driven primarily by technology and science,  at a rate never seen before. Even the liberal democratic governments have struggled to to keep up with this explosion. When the industrial revolution began, close alignment between the mercantile economies and the imperial governments of the richest countries ensured that major projects were mutually beneficial to all involved. As we enter a period where much of the engines of the industrial revolution need to be re-engineered, our governments have proven to be slow to act. Without going into details as to the causes of this malaise, if we accept this issue we can create a government led approach that can avoid this issue.

When Sweden wanted to ensure that objectives over long time frames (10-20+ years) were addressed by it’s governments, they created an external body, not beholden to the swings of the 3 yearly political landscape. The key is to depoliticise the decision making process on issues that have uncertainty. Politics is not very good with dealing with uncertainty. Without going into detail, essentially this is because to become elected you need to convince people you can deliver, it’s not very convincing if you have qualifiers or maybes in your pitch to solve a problem. Worse, if the situation changes and changes to the plan need to be made, this becomes politically difficult, now you have ‘flip flopped’ which is the worst thing you can do in politics. Conversely in science, when presented with new evidence, changing your mind to match the new evidence is seen as not just a useful and preferred trait, but in fact as one of the best traits to have. We can bring this thinking to government, by remove long term decision making, and it’s risks, from the politicians. 

Energy Bank of Australia

David McKay, the physicist and author of ‘Without Hot Air’, famously said “I’m not anti-anything, but I am pro-arithmetic”. We need an energy plan that adds up and unfortunately it seems that our political system that focusses on a 3 year cycle, is not up to the task of making this long term transition.

The Energy Bank of Australia would be an independent but government owned ‘bank’ tasked with reducing emissions. Similar to the Reserve Bank of Australia, the EBA would have a target annual emissions reduction range (similar to the RBA’s target inflation rate) and would be able control a national emissions tax. The revenue raised by the emissions tax would be used solely to fund emissions reduction R&D and infrastructure projects. 

A key difference of this approach compared to government directed tax and funding, is that the EBA will continually, independently and by using expert scientific methodology, assess technologies for their use to meet the aims of the EBA. The rate of income via the tax would only be made if it can be redeployed to strategies that can impact our emissions over the 20 to 40 year timeframes that something of this magnitude needs occur.

The benefit of this balanced input/output approach is that if we can move fast (healthy input), the EBA can move fast, but conversely it can avoid putting too much pressure on economic activity and can slow the rate of change if the burden becomes too high (unhealthy input). Over the time frame of 40 years we would expect times of great speed but also times of conservation of economic output. These times are not likely to be nicely synchronised to our political cycles, and this drives the need for an independant body, staffed with experts who can manage the day to day running of plan to meet these objectives, through a changing economic, technological and political landscape.

As we have seen with so many other major government projects that have to deal with technology, like the NBN, allowing the government to determine the technology as policy is not economically or technically ideal. A key advantage of removing these decisions from politicians will be that we are more likely to get better outcomes, by using experts to inform our investments of time and money.
Below are some suggested elements of the EBA. Certainly this is not a fully cooked plan, but it does give some ideas of how we could create this entity so that we can start our energy transformation.

Goals

  • Annual emissions reduction range
    • IPCC and Paris agreement targets
    • Can be back ended to allow technology and investment ramp up
    • Working on 20 and 40 year timeframes
  • Economic goals
    • Create globally exportable technology
    • Support Australian development of high value technology
    • Create opportunities for foreign private and public partnerships

REVENUE TARGETS

  • Emissions tax rate: 0%-5%
  • Variations for fuel types and usage types can be used to fine tune outcomes
  • Target CPI: < 5%
  • Australian annual spend on energy: $46b/year
  • Emissions tax revenue estimates: $2b/year
  • Emissions tax applicable to: CO2, CH4, O3, and other compounds as recommended by the CSIRO and IPCC
  • Ability to sell government backed bonds to create the investment funds, returns funded by the tax.
  • Interest Rates on lending: Goverment bond rates, government guaranteed
  • Investment conditions: Locally developed IP or global JV so that some % of profit is returned to Australia

Funding Targets

Reliable synchronous generation capacity with extremely low emissions

  • Capacity factor >90%
  • 20 year funding target $30b
  • 40 year target grid capacity 80%

Unreliable asynchrounous generation capacity with extremely low emissions

  • Capacity factor >20%
  • 20 year funding target $5b
  • 40 year target grid capacity 10%

Remaining generation capacity from exisiting extremely low and low emission sources (mostly hydro, with some wind, solar and gas for backup of thoses and additional VRE sources)

Other areas for Evidence, Experiments and Experts

The 3E model can be applied to other large government programs from health to social security. In fact there is already elements of this model existing today, however in the most part, much of the command and control is retained at the elected official or ministerial level. To some extent the public demands this however we should be ensuring it becomes the exception and that whenever politicians are acting as the experts, it is clear. Our governments must become boards of review for the most part and focus more time on ensuring evidence, experiment and experts are used as much as possible.

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