Monday, January 21, 2008

California dreaming, by Glenn Milne - The Australian - 21st January 2008

LOS ANGELES: The great thing about visiting California is that it gives you a sense of where Australia is probably headed. In the context of the climate change debate, this assertion stands, only more so.

So to come here and see some of the political and economic hurdles that are emerging out of the market forces unleashed by global warming, and the political response to it, is to understand that while Kevin Rudd still basks in the warm afterglow of ratifying Kyoto, just a little way down the track substantial domestic challenges loom.

Remember, California Governor Arnold Schwarzenegger is something of an environmental pin-up boy for Rudd. During the election campaign, Rudd repeatedly used Schwarzenegger's embrace of an 80 per cent reduction in greenhouse gas emissions below 1990 levels by 2050 to justify his own approach to target-based policy.

The thrust of Rudd's argument was that if California, one of the biggest and most successful economies in the world, could adopt such an approach, why couldn't Australia?

That line got the Prime Minister through to election day. But to watch the energy debate first-hand here in Los Angeles is to recognise that it is precisely because California is the world's eighth biggest economy, with a population of 37 million, that it can adopt such ambitious targets.

Schwarzenegger's policies and those of his Queensland-raised environmental adviser Terry Tamminen were the subject of much discussion at an energy and climate change symposium, The Road to Renewables, held this week in LA as part of the Australian government-sponsored trade and investment promotion program, G'day USA.

The Road to Renewables policy menu was heavy and so were the players involved. Tamminen moderated a number of the panels. The symposium was sponsored by Chevron, FedEx, Geothermal, Holland & Knight, Macquarie Bank and Woodside Petroleum. The keynote speaker was the Deputy Mayor of Los Angeles, Nancy Sutley, who also heads the city's Energy and Environment Department. The idea behind the symposium was to put Australian companies in touch with some of the cutting-edge environmental technologies and thinking in the US. But what also emerged was a recognition of the rationale behind Schwarzenegger's environmental crash-or-crash-through crusade.

Schwarzenegger's thinking is crudely simple and effective. He believes that Californians want urgent action on the climate-change front and he feels compelled to respond to this democratic impulse.

The strategy is to set mandated targets and then for the Government to simply get out of the way.

In other words, Schwarzenegger is using the sheer mass of the Californian economy and, critically, its venture capital base to crash through any resistance on the climate change front.

In the process he's convinced he will drag George W. Bush and the rest of the US along with him.

The inevitable question that arises in the Australian context of proposed greenhouse cuts is this: do we have the mass, the capital, or the technological know-how to avoid the crash scenario? The American experience suggests Rudd's approach, after the Garnaut report, could face significant difficulties.

Take coal. In the US, more than 50 proposed coal-fired power stations in 20 states were cancelled or delayed last year because of concerns about climate change, construction costs and transportation problems.

Coal is used in 600 US power stations and produces more than half of the country's electricity. The industry has now been gripped by a crisis of confidence. Once again it is California that is setting the pace in rattling that confidence.

Sutley told the G'day USA renewables conference that two years ago the city announced it would not be renewing its long-term contract for coal power with the Intermountain Power Project in Utah.

Other southern Californian utilities immediately followed suit. While Labor's wall-to-wall governments in Australia talk the talk on climate change, the fact is there are right now more than 20 coal-fired power stations that are either in the pipeline or have been approved by state premiers.

In NSW, Morris Iemma has been trying to sugar-coat his proposed privatisation of the state's electricity industry by telling his Labor base in the Hunter Valley that their power jobs will be replaced by new ones made available through the construction of a coal-fired power station.

The signals out of the US are that these sorts of economic and investment certainties are gone as part of the post-Bali climate change dynamic.

Altered consumer behaviour by ordinary folk anxious to do their bit to combat global warming can also throw up some pesky anomalies.

In California, legislators are now forcing through new regulations because of the consumer switch from oil and gas-based heating systems to the renewables-friendly technology of what are known here as outdoor wood boilers. At least seven states and dozens of towns in the north and midwest have passed or are considering measures to ban, restrict or monitor these OWBs. It turns out emissions from these are much worse than anybody assumed.

There are reports of fights between neighbours over air quality and migrations to towns with boiler bans.

The quaintly named Hearth, Patio and Barbeque Association, an industry group, told USA Today that while wood may never burn as cleanly as natural gas or oil, it was an important renewable fuel that reduced dependence on fossil fuels.

No doubt we can look forward to many of these same dry-gully debates as climate change policy begins to have an effect in Australia.

California's lead, meanwhile, does present Rudd with one political opportunity: whatever interim 2020 emissions target the Australian Government sets after receipt of Garnaut report, it's bound to look conservative by Sacramento standards. Consider some of the statistics presented to the G'day USA symposium by Sutley. Under the Green LA climate change plan, the target for the city's emissions reductions is 35 per cent below 1990 levels by 2020. This 35per cent goal is the most ambitious of any large city in the US. It will exceed the target set by the Kyoto Protocol for 2012 (7 per cent below 1990 levels by 2020). Not only that, LA plans to get 35 per cent of its public utility from renewable sources by 2020.

And this is not pie-in-the-sky stuff. According to Sutley the city is on track to meet the 20 per cent renewables goal by 2010.

Committed and existing projects in the city represent almost a 13 per cent cut by 2010.

But once again Sutley's impressive stats sheet is a reminder of the vast horsepower of the Californian economy compared with Australia.

The state's venture capital base means there are a number of viable - and giant - renewable energy projects on foot.

They include a 125-megawatt concentrated solar plant in the high desert area, a 265MW geothermal power station in the Salton Sea area and four waste-to-energy plants totalling 100MW of power that will convert LA's municipal solid waste into power.

A case of garbage in, energy out.

Schwarzenegger believes clean technology, along with biotechnology, will be the next wave in California's economic growth. In a recent speech, he said: "Right now, in California's university labs, corporate research parks, even plain-looking offices in strip malls, something very, very exciting is happening.

"The nation's brightest scientists and the smartest venture capitalists are all racing to find the new technologies for alternative energy.

"Capitalism, interestingly enough long the alleged enemy of the environment, is today giving new life to the environmental movement.

"We have proven in California that we can protect both the environment and the economy."

Rudd will be hoping something very similar is happening in Australia. For the country's sake, it has to be.

Glenn Milne is in Los Angeles as a guest of the G'day USA program.

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