Reducing my carbon footprint

It's been a while since my last blog. I've been on vacation and have added a load of carbon to the atmosphere by taking a long haul flight to Switzerland. I felt guilty about it so I bought carbon offsets with my flight ticket (but at about $10 AUD per tonne, Qantas seems to have massively underpriced CO2). Anyway, what I am trying to say is that I suspect that I am like many people - I am concerned and want to do my bit but there's a limit to how much lifestyle I am really willing to sacrifice. So I thought I'd get scientific about it. What exactly is my personal carbon footprint and what can I change that will have a big impact without without huge lifestyle sacrifices?

I used a web-based carbon footprint calculator (http://www.1degree.com.au/carbon_calculator) to estimate what my annual CO2 emissions were 6 months ago before I started to make any changes. The answer was 26 Tonnes of CO2 per year - 12 Tonnes more than the Australian average! The CO2 was roughly equally split between household, car, and flights:

• 10 tonnes from household electricity (I don"t have gas so everything is electric).
• 10 tonnes from driving a heavy 4WD 25,000km per year (mostly commuting to Canberra).
• 6 tonnes from flying (about 5 domestic and 2 international flights per year).

When I re-calculate my footprint today after making some changes it comes to 5 tonnes:

• Zero tonnes from household electricity - because I pay the premium for green energy and I changed all bulbs to low energy types.
• 5 tonnes from driving - same number of km but I got rid of the 4WD and bought a mid sized diesel (VW Tiguan).
• Zero tonnes from flights - because I buy carbon offsets with flights.

I can get the 5 tonnes down to about 1 or 2 tonnes in future when really fuel efficient cars are commercially available (I'm hanging out for the VW 1L - see http://en.wikipedia.org/wiki/Volkswagen_1-litre_car - but I'll have to wait till 2012 before it's available).

Now the reality here is that, other than getting a more fuel efficient car and changing all my light bulbs for low energy bulbs, I haven't really done anything other than pay more for electricity and flights. It's basically my choice to pay more for my lifestyle rather than significantly change it. The obvious question is whether the extra payments really do translate into lower CO2 emissions or whether Origin Energy and Qantas are having me on?

• The electricity is accredited green power (see http://www.greenpower.gov.au/home.aspx) and is costing me an extra $300 per year which works out to about $50 per tonne of carbon (I reduced my consumption from the 9 tonne equivalent of 6 months ago). The price is pretty close to the USD $30 to $40 per tonne that seems to be the most accepted figure. Also the government green power accreditation scheme feels fairly rigorous. So I have a high confidence that my power consumption really does match up to green wind power generation.
• The Flights are another story. The premium I pay equates to about $10 per tonne which seems too cheap. Obviously you cant power a plane with wind power so the mechanism used is "carbon offsetting" which basically means that Qantas need to buy carbon credits from a project like tree-planting that absorbs an equal amount of carbon to that emitted by the flight. You can read what Qantas have to say about this at http://www.qantas.com.au/travel/airlines/fly-carbon-neutral/global/en. Personally I don't find it very compelling. It feels like "feel good" marketing blah-blah without a really solid foundation in thoroughly certified and audited offset projects.

So in summary I've reduced my footprint from 26 tonnes to 6 tonnes via a combination of actually reducing energy and fuel consumption and also paying for green energy and fuel offsets. Of course if we all do that overnight then there wouldn't be enough green energy generating capacity to meet demand. But reality isn't like that - it will take years and many people will not voluntarily choose to pay more. My changes mean that there is an increased commercial incentive (actually a legal imperative) for my energy supplier to build more wind farms. If only I could feel more confident in Qantas carbon offset claims..

What about other countries?

In my last two blogs I reasoned that there is a sufficient risk of climate change to justify some action and that an ETS is the cheapest solution and the most likely to succeed. But I can already hear you saying "that's all well and good but if China keeps pumping smoke in the air, it wont matter what Australia does". It is certainly true that it is global emissions that need to be reduced. So setting a local emissions cap and running an ETS to achieve it wont solve the problem if we are on our own.

Of course there is an argument that we should so the right thing independent of others. And that others will follow if we set the example. Actually I'd say Europe is setting the example already and Australia and USA are laggards. But Copenhagen so far doesn't look likely to lead to a global consensus. Africa wants the Kyoto protocol to be extended because it excludes developing nations. China is offering a 40% cut in emissions intensity because it sounds better than it is. The rich world wants everyone to share the cuts which sounds more reasonable than it is. So what's the right approach? I give three options and what I think is the only fair and practical solution:

The Kyoto Protocol requires rich nations to make cuts in the total emissions of a collection of "greenhouse gases" of 5.2% from 1990 levels by 2012. The protocol is still active and does not expire after 2012. But the world is discussing the next thing because there are three major problems with it. The first is that it excludes developing nations like China which is now the worlds largest carbon emitter. The second is that the worlds second largest emitter (the USA) has not ratified it so isn't playing the game. The third is that there's no real mechanism to enforce compliance or extract penalties. So this option wont really deliver a long term solution.

Developing nations (notably China and India) talk about a scheme which requires countries to reduce their emissions intensity. What does that really mean? Emissions intensity is emissions as a percentage of GDP. China is offering a 40% cut in emissions intensity by 2020. China's GDP growth is about 8% per year and if it continues at that rate then China's GDP will have increased by 115% by 2020. So the offer of 40% cut in emissions intensity actually means about a 30% increase in total emissions. There are two major problems with this approach. The first is that it wont meet the goal of reducing absolute global emissions to the levels that collective scientific wisdom says is the safe level. That makes it pointless right from the start. The second is that it wont be perceived as fair either by rich nations (that have lower GDP growth) and very poor nations (that also have low GDP growth) - so it is unlikely to to lead to a global agreement. Think about it - if you set a global cap and then allow faster growing countries to emit more, then slower growing countries have to cut even more than they would under a flat target scheme.

Fortunately there is a fair and equitable way to share the burden of carbon emissions across the world and to do so in a way that will actually be effective in achieving emissions targets. That is to set a global cap each year and to share it equally per head of population and to allow countries with emissions below the cap (mostly the poorer and more populated ones) to sell permits to the richer ones. This per-capita emissions cap and trade system has three clear advantages. First is that it sets a clear cap each year that would be in line with the scientific targets (in other words it actually achieves the goal). Second it is self-evidently fair and equitable because poorer nations will be allowed to grow and sell permits whilst richer nations will need to buy permits or cut emissions. Also there is something intrinsically fair about every human inhabitant of the earth sharing equally and independent of national boundaries or any other variables. The third benefit is that this approach is perfectly aligned with national ETS schemes because it will immediately set a global market price for carbon emissions. Therefore it drives the right behaviour. Richer countries will have a commercial incentive to switch to clean power - and when they do so they will need to buy less permits from poorer countries. Poorer countries can burn coal but the more they burn the less available permits for sale.

This impact of this scheme on Australia is that we would all still pay about the same amount for our emissions (I estimated my share to be $635 per year in my first blog) but the government would end up paying most of this income to poorer nations. Personally I don't mind. I feel lucky to live in this country and I already give more than that to international charities anyway. And besides, it would be a short term thing - as Australia switches to clean power and poor countries are slower to do so, the payments would quickly decrease.

So far in this blog I've said why action is justified (it's an insurance policy) and how to do it at both a national and international level. But what about you and me? What can we do at a micro level in our own homes and cars to reduce Australia's emissions? Yep, that's the next blog!

Is an ETS the right kind of action?

In my last blog "It's an insurance policy" I argued that taking action on climate change is simply a risk management issue. You don't have to be 100% sure that global warming is a result of human activity - you just need to think there's a high enough risk that we are the cause to justify paying a premium to reduce our carbon emissions.

But what kind of government action is needed to make sure that we all pay our fair share of the premium, that it's the cheapest premium possible, and that it actually works to reduce emissions?

The way I see it, this is a simple economic issue: Coal fired power is cheaper than any other kind of power so, in a free market system, there is no reason why any generator would build anything but coal fired power stations. Maybe in time, green power will get cheaper and coal will get more expensive even if government does nothing. I'm not convinced of that. There's easily 300 years of coal still under the ground. Eventually it will run out but not before Carbon emissions have far exceeded safe limits. So government policy needs to find a way to make coal more expensive or green power cheaper. There are three ways to do that.

The first option is "direct investment" - government spends taxpayers money to directly fund or subsidise specific green energy projects like wind farms or solar power stations. It will work but my problem with this is that I'm not convinced that government is best qualified to pick the winners or that they are the most efficient operators of major national infrastructure. Where's the incentive to innovate and where does it end? Government could end up owning or part owning 100% of the power generation capacity in Australia. It might not be called a "tax" but you can be pretty sure that this option will cost more tax dollars than any other.

The second options is a "carbon tax" - government levies a flat tax per ton of carbon. The idea being that the tax makes coal fired power more expensive so the market will find that it is more cost effective to build green power stations. I think this option is pretty risky. How will government set the right tax level? Lets say that the tax is set at $50 per ton. But if it needs $60 per ton to make green power cheaper, then coal is still cheaper and nothing changes - so we'll have paid a tax that has no benefit. Or alternatively if it needs $40 per ton to make green power cheaper then we'll be paying an unnecessary $10 per ton. This option also has no direct connection to an emissions reduction target - "how much tax is needed to reach a 40% emissions reduction by 2020?". There's no way to answer that question.

The third option is an Emissions Trading Scheme (ETS). Also called a "cap and trade" system. The basic idea is that the government starts by setting an annual limit (the "cap") on the amount of carbon that can be emitted. Then the government auctions permits (the "trade") to emit up to the cap. The free market sets the price of the permits. There are less permits available each year so unless coal power is replaced by green power, the permits will get more expensive. Clean power stations don't have to buy permits and so there is a strong incentive to innovate low cost clean power systems. So this option achieves the desired outcome (because the cap is set) at the lowest cost (because the free market sets the price of a permit). And guess what? it's not a new idea. Does anyone remember the problem of "acid rain" in the '80s? Power stations were emitting too much sulphur which mixed with rain and turned into acid which did a lot of environmental damage. It was a cap and trade acid rain program started by the US EPA 20 years ago that fixed this problem faster and cheaper than anyone expected!

So to my mind, an ETS is by far the most obvious solution to the problem. Federal liberals are calling the ETS a "tax" to scare people off. Of course it's a tax! ALL the options are a tax! But an ETS is the lowest tax option with the highest chance of actually working. It does seem ironic to me that its labour government that is proposing an ETS (a free market low tax option) and a liberal government that is proposing direct investment (a big government, high tax option).

So if, like me, you are a traditional liberal voter but want action on climate change then you have a headache. I have no confidence that the liberal leadership even understand this issue, never mind how to deal with it. So until the message from the liberals changes, Kevin Rudd has my vote.

So, in summary, I'm ready to pay my premium and I think an ETS is the clear winner solution. But what about the rest of the world? What does it matter whether Australia takes action if China keeps pumping out far more carbon? That's the subject of the next blog!

It's an insurance policy

Some say global warming is just the planet showing natural temperature cycles and has nothing to do with human activity. Others say that there is no doubt that we are the cause. Personally I'm not sure but I can't ignore that fact that there is a very large and credible body of scientific opinion that believes humans are causing climate change.

But you know what? I don't need to be sure that we are the cause, I just need to believe that there's a fair chance that we are the cause in order to support some action. It's like my car insurance - I don't need to be sure I'm going to have an accident next week before I buy my insurance policy. What I want to know is how much does the insurance premium cost? Then I'll decide whether I'l buy the policy or take the risk.

But how to figure out the price of this insurance policy? Well I had a go at Origin Energy's "Offset Calculator". I went on the high side (large house in NSW with lots of electrical appliances and a diesel mid-sized car that does 25,000km per year). It said $127 per year for my car and $508 per year for my house. So that's $635 per year for an insurance policy against a possible climate catastrophe. Less than 0.5% of household income. Much less than my car insurance (about $1500 per year), my home insurance (about $1200 per year), my private health insurance (about $2200 per year).

Hmm, would I pay this new premium? Yep!, in a heartbeat!

Do I believe that everyone else in Australia will do the same? Probably not. Some certainly will but most probably wont unless they have to. So that makes me a supporter of some kind of government action that forces a change to reduce emissions. What kind of action is the subject of the next blog!