Just transition to a sustainable future without natural gas

By Jim Crosthwaite and Colin Long

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Introduction

The drive for profit in extracting, selling and using gas challenges efforts to secure sustainable futures, whether local, regional or global. As a fossil fuel, gas now comprises over 20% of energy used world-wide. Gas is primarily methane. When burned, it produces 75% of the carbon dioxide of black coal.

Gas use is forecast to grow by 50% by 2040; 20 years in which climate change must be reversed. The ecological limits must be faced, and commitment made to a speedy and just economic transformation away from this industry.

Gas and our economic system

In 2016, nearly half of the gas in the eastern states was used by industry, 33% by residential and commercial users combined, and 21% by power generators. Industrial use is concentrated in just a few very large companies producing non-ferrous minerals (largely alumina), polyethylene and ammonia. In total, 130,000 Australian businesses and five million homes use gas, along with many community organisations.

Since 2016, production has risen dramatically from new export-orientated fields operated by Chevron, ConocoPhillips and others in northern Australia. Liquid Natural Gas (LNG) is exported mainly to Japan, Korea and China under long-term export contracts.

Huge investments and large workforces are involved. Collectively, the workers produce gas, read meters, do technical or clerical work, engineer systems, transport gas, and install and maintain equipment. At least seven unions cover gas industry workers. An estimated 2,900 gas fitters are employed in Victoria alone.

Advocates see gas as a bridging fuel between coal and renewables, and gas peaking plants as a means of providing grid stability.

Shortages, privatisation and corporate power

Industry, regulators and the Morrison Government are pressuring Victoria to drop its permanent ban on offshore drilling, and its moratorium on fracking for onshore gas. Some call for gas reservation so that domestic needs are met first.

But is there even a shortfall? Independent experts say no, as did BHP Billiton Petroleum’s Mike Yeager in 2012:

We have a lot of gas in eastern Australia that's available ... there's plenty of gas to supply those provinces for - you know, indefinitely.”

The Chief Executive of AGL made a similar statement in 2015.

Privatisation of the gas transmission and distribution systems, once managed by each state, was accompanied by the creation of a single east coast market. Planning, oversight, regulation and monitoring have since passed to multiple national authorities, the same ones responsible for electricity.

The authorities regularly complain about failings in the gas market, which is characterised by concentration of power and lack of transparency. Information asymmetries exist between producers, pipeline operators, wholesalers, retailers and end users.

Very big gas price rises, well above export parity, affect industrial users and households. Firstly, prices are pushed up by LNG exporters who found production costs were higher and prices lower than expected. They are also recouping the cost of three export terminals at Gladstone that cost $60 billion. Secondly, domestic gas is extracted to maximise profit over time, and take advantage of price rises. Thirdly, monopoly owners of pipelines extract rents from the market.

Electricity is also priced by the marginal cost of using gas fired generators to meet power shortfalls at peak times.

In a bizarre twist, companies like AGL propose gas imports using LNG carriers and specially built jetties, processing facilities and pipelines.

Envisaging a just transition away from gas

A bold vision for Australia’s energy future is required. Ross Garnaut sets out a vision in Superpower. His preferred long-term pathway is a carbon tax. Meanwhile he proposes a step-by-step series of incentives and regulations that will increase the competitiveness of renewables. Direct action to lower gas use is not proposed. Moreover, he does not make a case for protecting workers and communities.

Government support for gas needs to end. It has been crucial to the industry, notably through fossil fuel subsidies, investment tax breaks, and even support to help other countries import LNG.

Climate change calls for co-ordinated policy on demand-side management (DSM) encompassing energy efficiency, energy conservation, demand response, on-site generation and behind-the-meter storage (Warren 2019).

Governments can support electrifying manufacturing processes that currently use gas. Beyond Zero Emissions identifies steel, aluminium castings, plastic making, brick making and glass making. At least government is starting to lead planning for a hydrogen industry that can potentially replace gas use in industry and in exports.

Strong action to reduce household and commercial demand for gas is also required. The cost effectiveness of an all-electric home is now well established. Connecting new suburbs to gas should stop. Pressure is needed right now on governments to counter gas industry lobbying to equally rate hot water heaters run on gas and electricity.

The enormous demand for energy efficiency upgrades to residential and commercial property in Australia provides a very real opportunity to find alternative employment for workers in the gas industry. An estimated 12,000 jobs a year over ten years could be created.

Key to a just transition for workers in the gas industry are commitments to no forced redundancies, job guarantees, and worker transfer schemes so workers are transferred from companies undergoing closure into other viable firms.

Discussion

Humanity has set itself 30 years to reduce carbon emissions to zero. Each year, the ecological rift grows. Gas use must end sooner, without resort to using it as a transition fuel.

Corporations may want climate change addressed, but only at a pace that is within the scope of ‘business as usual’. The regulatory framework that has evolved for gas is manifestly weak. Nationalisation of the energy industries may come. Community and worker interests need to be foremost. Meanwhile, there are many opportunities for leadership at grassroots, regional and state levels to take forward this agenda. Local action can be a beginning for community mobilisation against all gas use.

References

  • Beyond Zero Emissions (2018) Zero Carbon Industry Plan: Electrifying Industry.
  • Garnaut, Ross (2019) Superpower: Australia's Low-Carbon Opportunity.
  • Warren, Peter (2019) “Business and Policy Models to Incentivise Utilities to Engage with Demand-Side Management.” Green Finance, Vol. 1, pp.4-29.

Jim Crosthwaite trained in agricultural economics, and later developed an interest in political economy and ecological economics. For 24 years he worked for the Victorian Government on the economic and social dimensions of biodiversity planning, and including biodiversity priorities in agriculture and natural resource management programs. He managed the Conservation Management Network program for some years. Jim completed his PhD in 2001 on Farm Businesses and Natural Resource Management. He maintains an active interest in all these areas.

Colin Long is Just Transitions Organiser at the Victorian Trades Hall Council, responsible for policy and organising around the transition to a sustainable economy for the Victorian union movement. From 1998-2010, Colin worked in heritage preservation in Southeast Asia and was Victorian Secretary of the National Tertiary Education Union from 2010 to 2018. Colin sits on the global advisory board of Trade Unions for Energy Democracy, and is a Board member of VicSuper, Earthworker and Cooperative Power Australia.

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