The climate challenge is big – it needs an even bigger solution
Planet Earth keeps warming, sea surface temperatures have jumped dramatically, emissions are still rising and fossil fuel producers are accelerating production. These facts are alarming. But they are seemingly insufficient to enable humanity to unite to address them. In fact, we remain largely divided, chipping away at the problem with millions of tiny hammers, a few bigger ones, and making very little progress.
There are many factors contributing to this situation - I believe these 3 are critical: -
Most climate solutions are too small and do not address the root cause
They add great complexity which distracts us all from the big solutions that can address the root cause and happen to be remarkably simple
Individuals, nations and economies are still chronically dependent on fossil fuel.
And the root cause is? - the production and burning of fossil fuels, illustrated below.
So why is it happening?
It appears humanity is not well equipped to think big - not big enough to face the enormity of the root cause, and the power of the lobby behind it.
Humans evolved in small groups, mostly focussed on the needs of their people and the local environment. In just a few centuries we have moved from tribal to global, from having minimal impact on the environment to threatening the sixth mass extinction. We did not evolve with a natural ability to think and act globally. The planet and its health are well beyond what we evolved to deal with.
There have been exceptions through the ages - people who wanted to know more and asked the big questions about our environment, our earth, the stars, even the universe. They became philosophers, spiritual leaders, scientists, ‘wise people, thought leaders, etc. But they were always a very small minority, sometimes influential, other times dismissed and ignored.
The need for a big solution
Now that we face a global crisis, we need many more than a small minority thinking big and working together to address the root cause. Not only do we need to grasp the enormity of the problem, we also need to come up with big solutions. Phasing out fossil fuel production and consumption seems too big to contemplate. And the industry is very effective in supporting this view.
So, we tend to think smaller, sometimes very small and hope that many thousands of piecemeal actions will add up to being enough to solve the problem. So far it has had little effect and the world is happily consuming all the new renewable energy it can get while still consuming increasing amounts of fossil energy.
The fossil fuel economy is enormous. It dominates the global economy and overshadows the clean energy economy that is trying to emerge from its shadow. Its roots are being fed by the huge revenues flowing from the purchase of fossil fuels, delivering big profits that make it attractive for banks to provide finance for new exploration and expansion. Direct subsidies, concessions, low tax and moral support from governments add further nurturance. And the 'implicit' subsidies that flow from the unpriced social, health and environmental costs of fossil fuels makes them artificially cheap and in high demand.
The clean energy economy, however, is relatively small. Its roots are also being fed by various revenue streams - from the electricity market, some subsidies such as the Renewable Energy Target, private finance, and now through government investment in transmission, hydrogen, critical minerals and upstream industries; and most recently the Capacity Investment Scheme.
These are important investments but cannot yet match the huge revenues flowing to fossil fuel producers who will keep expanding and producing as long as they are profitable and have the overt, or even tacit support of government. While the IEA is predicting that fossil fuels will peak by 2030, finance will continue to flow to places where profits are being made.
Redirecting financial flows
Emissions from fossil fuels will most effectively be reduced by redirecting the flows of finance away from the fossil fuel economy towards the clean energy economy. Progressively starving the roots of the fossil tree and feeding more to the clean energy tree is the obvious solution. It can best be achieved by means of a predictably rising price on the greenhouse gas potential of fossil fuels at the point where they enter the economy. It appears that this solution is too big for most people, (including many climate advocates) and preference is given to many smaller piecemeal solutions (like the reformed safeguard mechanism) that snip at the leaves and branches of the fossil tree. However, as long as the roots are being fed, the tree keeps growing.
Many of the policies that feed the clean energy economy are small and piecemeal as well. And they tend to add leaves and branches to the tree instead of just feeding the roots and enabling growth to happen automatically. Support for EVs, the new Capacity Investment Scheme, electrification, green hydrogen, transmission infrastructure, etc. are all important and will make a difference, but until the finance is flowing decisively towards zero carbon and away from fossil fuels, progress will be slow.
Finance for renewable infrastructure has dried up in Australia due to the success of President Biden’s Inflation Reduction Act which is attracting huge financial flows towards building the renewable economy in the US. A proposal that Australia responds with a similar big funding package ($100bn over 10 years) will certainly help feed the roots of the clean energy economy but taxpayers will foot the bill and fossil fuels will continue to pollute for free. This seemingly big solution will encourage clean energy but will do so without stemming financial flows to fossil fuels. It’s a bet on both horses when we know that only one should win! It could also be inflationary.
A robust, economy-wide price on pollution would go a long way to attracting the necessary finance to grow the clean energy economy at sufficient speed and duration to complete the transition, with little or no need for taxpayer support. A predictably rising price on pollution will redirect the finance from fossil to clean energy at little or no cost to government and speed up emissions reduction more quickly than simply funding clean energy. It will also make new coal and gas exploration and development increasingly unviable. And coupled with a CBAM, it becomes an even bigger solution, a global solution, as it incentivises our trading partners to price pollution too.
Getting new clean energy built by pricing fossil fuel pollution will have a powerful multiplier effect by redirecting fossil fuel windfall profits towards clean energy, slowing and eventually ending investment in fossil fuels, speeding up innovation and giving the fossil fuel industry a clear price signal to phase down and reinvest. And it will enable many of the objectives of piecemeal policies to be achieved automatically, dramatically demonstrated by the EnRoads Simulator which shows that a high price on pollution achieves the same as a dozen taxes, subsidies and regulatory schemes.
"We are at a fork in the road. We can either continue with business as usual and addiction to fossil fuels, or we can put an honest price on carbon that makes fossil fuels pay their cost to society," James Hansen
Adding a ‘climate dividend’ to the pollution price, paid monthly to all citizens, turns inefficient subsidies and the social and environmental costs of pollution into ‘climate income’ for Aussie households and enables citizens to participate in decarbonising the economy as they shift their spending to low-carbon living. It also helps address cost of living pressures on low to middle income households as well as making low-carbon living cheaper over time for all citizens.
The problem of complexity
Our societies and economies are extremely complex and fossil fuels permeate almost every corner. So, addressing all this complexity piece by piece makes solving the problem bewilderingly complex as well. Each piecemeal policy interacts and influences others in ways that create more and more complexity. They consume lots of time and resources to advocate for, plan, develop, implement, manage and regulate - and they impose a significant regulatory burden on stakeholders.
The gaps between each policy and its implementation in the economy will inevitably enable many emissions to continue, thus slowing the transition and complicating the ongoing task of decarbonisation in ways that advantage the fossil fuel industry.
A progressively rising price on the greenhouse gas potential of fossil fuels, at the point where they enter the economy, provides a solution that is much simpler than the piecemeal alternative. At the same time it is more comprehensive and doesn’t allow the gaps between solutions that emissions can escape through. As well as being too big for many to contemplate, this solution may seem too simple as well. We have come to expect complexity in all that we do and are suspicious of simple solutions, which seem too good to be true. This suits the many vested interests who can hide behind complexity and the confusion that it creates.
Dependency
A third reason for continued rising emissions is our chronic dependence on fossil fuels and its many derivatives. They deliver many positives to human experience that would be hard to do without and may not be immediately replaced by clean energy and its derivatives. Power, wealth, luxury, mobility, travel, comfort, convenience, entertainment, glamour, romance and pleasure come easily to mind. Food, shelter and healthcare are made more plentiful and more available by fossil fuels. Just about everything we use contains fossil fuels or requires fossil fuels for their production and distribution. We are all dependent, including all those involved in advocating and designing climate policies.
Our economies and the governments that direct them are also chronically dependent on fossil energy, its products and services. This could be called an addiction and has been discussed as such in CCL’s Policy Playbook - Addressing humanity’s fossil-fuel addiction. Our addiction combined with the artificially low price of fossil fuels makes it very difficult for us to transition to clean energy. Going ‘cold turkey’ is way too hard.
We need the ‘invisible hand’ of a predictably-rising price on pollution to guide our choices and engage us all in a steady process of decarbonising our economy and adapting as we go. It is the simplest way to wean ourselves, our governments, our economy and the fossil fuel industry off our society-wide addiction to fossil fuels. And to enable us to adapt as the clean energy economy steadily takes over.
A climate dividend to households will be critical in making the pollution price politically viable. The dividend has enabled Canada’s climate income policy to survive 2 elections and a high court challenge. Its success is making it vulnerable to further attack. We will also need government and other leaders to explain how ‘pricing pollution and paying people’ is the simplest and most effective way for the nation to collaborate in addressing the climate challenge together.
Rising to the big solution
It is time for our society to rise above localism, stop thinking small and piecemeal and to demand a solution that is at least as big as the problem. It’s critical that we address the biggest challenge humanity has ever faced with an even bigger solution. The fossil fuel industry knows that an effective price on their pollution is the biggest threat to their continuing production, which is precisely the reason they have so effectively worked against it. Sadly, they have convinced many of us to stop trying and have succeeded in inducing a denial that pricing pollution will ever be politically possible. And our own addictions to fossil fuels have made it hard for us to resist them.
It is now essential that we get over our denial of pollution pricing and give our governments the coverage they need to rise to the big solution as well. Our tendency to criticise their low ambition, to demand unspecified ‘climate actions’ and suggest piecemeal solutions gives them little support to stand up against the power of the industry, which also needs a predictably rising price to enable it to phase out and reinvest in the clean energy economy (currently running at only 1% according to the IEA). They also have families who will suffer when the market collapses.
A price on fossil fuel pollution, rising predictably until fossil fuels are no longer viable and all the finance has shifted to clean energy, is the big solution we need. Many other solutions can complement this policy but without it, a complex collection of smaller solutions will be too slow and too easily compromised. We must go for the big one.
Price pollution - Pay people!
