Saturday 31 July 2021

During the pandemic, a new variant of capitalism has emerged.

Extract from The Guardian

Opinion 

Economics

Spending is up. The world has been fighting a war against Covid, and in wartime the power of the state always increases.

Illustration: Nate Kitch

Last modified on Fri 30 Jul 2021 21.12 AEST

Over the past 18 months, the world has been amazed at how slippery an enemy Covid-19 has proved to be. The virus first detected in China at the end of 2019 has mutated on a regular basis. Vaccines need to evolve because the virus is changing to survive.

The shock to the global economy from the pandemic has been colossal, but things are now looking up – especially for advanced countries. Some are surprised by the pace of recovery, but they perhaps shouldn’t be, because alongside new variants of the virus there has been a new variant of global capitalism.

This matters. For decades the Austrian variant of political economy – the small state, non-interventionist, trickle-down, free-trade, low-tax model based around the ideas of Friedrich von Hayek – was dominant. It replaced the Keynesian variant because in the 1970s a free-market approach was seen as the answer to the challenges of the time: inflation, weak corporate profitability, and a loss of business dynamism.

Not even the biggest fan of capitalism would say it is a perfect system, merely that – so far at least – it has proved more durable than its rivals. And the flexibility to adapt to changing circumstances is a big part of that. The state is now a much more powerful economic actor than it was before the pandemic, much to the disappointment of the free-market thinktanks which are home to Hayek’s disciples.

Change was coming even before Covid-19. In retrospect, the last hurrah for the Austrian variant was the aftermath of the 2008-9 financial crisis, a period when the economic orthodoxy insisted on austerity to balance the books.

The upshot was weak growth, low investment, stagnating living standards and a backlash from voters. Central banks found it impossible to raise interest rates from their rock-bottom levels, because so many people on low incomes were relying on debt to get by, and higher borrowing costs would have tipped them over the edge.

At the other end of the spectrum, corporate and personal taxes were cut, and the rich got richer. The big tech giants, minnows themselves in their early days, used their market power to prevent new startups from posing a threat. Voters started to get the impression that the system only really worked for those at the top: and they were right. The populist backlash was aimed primarily at governments, but the real problem was that capitalism was starting to eat itself.

There were signs of a shift, from the middle of the last decade onwards. Donald Trump was no believer in free trade and was proud to call himself “tariff man”. The unexpectedly strong performance of Jeremy Corbyn at the UK general election in 2017 – with his powerful anti-austerity message – moved the dial too. It led then prime minister Theresa May to pledge an end to the policy. Boris Johnson’s shtick at the 2019 election – and subsequently – has all been about levelling up, not about trickling down.

This process has accelerated since the start of 2020, both at a domestic and global level. Governments of left, right and centre have intervened in their economies in ways that would have been unthinkable two years ago: paying wages for furloughed workers; keeping businesses afloat through grants and loans; preventing landlords from evicting tenants; and generally throwing financial caution to the wind. The world has been fighting a war against Covid, and in wartime the power of the state always increases.

It has not just been about governments spending and borrowing more, though that is part of the story. Fiscal policy – which covers tax and spending decisions – has taken centre stage for the first time since the Keynesian model ran into trouble in the mid-1970s. Central banks have become bit-players, and are having to fend off the accusation that their prime role is to print the money needed to cover the vast sums finance ministries are spending. The European Central Bank, previously tough in acting against the threat of price rises, has said it will tolerate more inflation before raising interest rates.

The race to the bottom on tax is coming to an end. US president Joe Biden has said he will pay for his latest spending plans by raising income tax on Americans earning more than $400,000 (£290,000) a year. At least 130 countries have signed up to plans, put together by the Organisation for Economic Co-operation and Development, for a minimum global corporate tax rate. Critics say the proposal doesn’t go far enough, but it is a significant moment nevertheless.

Meanwhile, the International Monetary Fund is telling member governments that they need to tackle the entrenched power wielded by a small number of dominant companies – or risk stifling innovation and investment. The IMF says the tech giants are a case in point because “the market disruptors that displaced incumbents two decades ago have become increasingly dominant players”, and they “do not face the same competitive pressures from today’s would-be disruptors”. But it is not just the tech sector. The IMF says the same trend towards falling business dynamism can be seen across many industries.

The building blocks of new-variant capitalism are already there. Governments are going to tax and spend more, and they will use regulatory powers to weaken monopolies. There will be selective use of nationalisation – as happened with UK defence manufacturer Sheffield Forgemasters this week.

Governments will borrow money to invest in infrastructure projects and to increase the budget for science. Industrial and regional policies will be back in vogue. The idea is to harness the power of the state with the dynamism of the private sector and, as was the case with Keynes, to save capitalism from itself.

There will be pushback, and it would be naive to think otherwise. This is evolution not revolution, and many of the weaknesses of the old order – insecurity at work, for example – remain untouched. Enemies abound. The mixed-economy model is anathema to those who think state intervention is either unnecessary or harmful, and to those who think the demise of capitalism is merely a matter of time.

The new variant of capitalism may prove to be a dud, but for now it has things going for it. These are times that call for a multilateral, collaborative approach, in which rich countries dig deep to help poorer nations, and themselves in the process.

Failings of the old model were exposed in the run-up to the crisis, while the benefits of a more hands-on approach have been demonstrated during the pandemic response. Unsurprisingly, there is appetite for a different way of running the economy. The reason a new variant has emerged is simple: there is a need for something stronger and more resilient than the old model.

Larry Elliott is the Guardian’s economics editor

Greenland: enough ice melted on single day to cover Florida in two inches of water.

Extract from The Guardian

  • Data shows ice sheet lost 8.5bn tons of surface mass on Tuesday
  • All-time record temperature of 19.8C in region on WednesdayGreenland’s melting season usually lasts from June to August. The Danish government data shows that it has lost more than 100bn tons of ice since the start of June this year.
Greenland’s melting season usually lasts from June to August. The Danish government data shows that it has lost more than 100bn tons of ice since the start of June this year.

Last modified on Sat 31 Jul 2021 04.34 AEST

Greenland’s vast ice sheet is undergoing a surge in melting, with the amount of ice vanishing in a single day this week enough to cover the whole of Florida in two inches of water, researchers have found.

The deluge of melting has reached deep into Greenland’s enormous icy interior, with data from the Danish government showing that the ice sheet lost 8.5bn tons of surface mass on Tuesday alone. A further 8.4bn tons was lost on Thursday, the Polar Portal monitoring website reported.

The scale of disappearing ice is so large that the losses on Tuesday alone created enough meltwater to drown the entire US state of Florida in two inches, or 5cm, of water. Ice that melts away in Greenland flows as water into the ocean, where it adds to the ongoing increase in global sea level caused by human-induced climate change.

Tedesco said a patch of high pressure is sucking and holding warmer air from further south “like a vacuum cleaner” and holding it over eastern Greenland, causing an all-time record temperature of 19.8C in the region on Wednesday. As seasonal snow melts away, darker core ice is exposed, which then melts and adds to sea level rise.

“We had these sort of atmospheric events in the past but they are now getting longer and more frequent,” Tedesco said.

“The snow is like a protective blanket so once that’s gone you get locked into faster and faster melting, so who knows what will happen with the melting now. It’s amazing to see how vulnerable these huge, giant areas of ice are. I’m astonished at how powerful the forces acting on them are.”

Greenland’s melting season usually lasts from June to August. The Danish government data shows that the island has lost more than 100bn tons of ice since the start of June this year and while the severity of melting is less than in 2019 – when 11bn tons of ice was lost in a single day – the area affected is much larger in 2021.

“It’s hard to say if it will be a record year for melting this year but there is a ton of warm and moist air over the ice sheet that’s causing an amazing amount of melt,” said Brad Lipovsky, a glaciologist at the University of Washington.

“The alarming thing to me is the political response, or lack of it. Sea-level rise is like a slow-moving train, but once it gets rolling you can’t stop it. It’s not great news.”

If all the ice in Greenland melted, the global sea level would jump by about 6 meters (20ft), and although this is unlikely to happen on any sort of foreseeable timescale, scientists have warned that the world’s largest island is reaching a tipping point due to the pressures exerted upon it by global heating.

Greenland’s ice is melting faster than any time in the past 12,000 years, scientists have calculated, with the ice loss running at a rate of around one million tons a minute in 2019. Greenland and the earth’s other polar region of Antarctica have together lost 6.3tn tons of ice since 1994.

This rate of ice loss, which is accelerating as temperatures continue to increase, is changing ocean currents, altering marine ecosystems and posing a direct threat to the world’s low-lying coastal cities, which risk being inundated by flooding. A 2019 research paper found the Greenland ice sheet could add anything between 5cm and 33cm to global sea levels by the end of the century. The world is on track for “the mid to upper end of that”, Lipovsky said.

“It’s very worrisome,” said Tedesco. “The action is clear – we need to get to net zero emissions but also we need to protect exposed populations along the coast. This is going to be a huge problem for our coastal cities.”

Turkish fires sweeping through tourist areas are the hottest on record.

Extract from The Guardian

Thousands of holidaymakers evacuated from Aegean Sea resorts as country fights more than 50 blazes.

Wildfires raging across southern Turkey force residents to flee – video

Last modified on Sat 31 Jul 2021 05.43 AEST

The heat intensity of wildfires in Turkey on Thursday was four times higher than anything on record for the nation, according to satellite data passed on to the Guardian.

At least four people were killed by blazes that swept through the tourist regions of Antalya and Muğla, forcing thousands of holidaymakers to be evacuated from their hotels by a flotilla of boats.

Conditions there and at the sites of dozens of other blazes throughout the country were tinder dry. Turkey’s 60-year temperature record had been broken the previous week when Cizre, a town in the south-east, registered 49.1C.

After deadly heatwaves in the Americas, floods in Europe and China, and fires in Siberia, the scenes of destruction in Turkey add to concerns about the growing ferocity of extreme weather in a climate-disrupted world.

A wildfire in the hills behind Icmeler Bay, in Muğla province.

Fires rage in the hills behind Icmeler Bay, in Muğla province. Photograph: Alina Kvasha/TASS

Wildfires are common in Turkey during the summer, but the blazes over the past two days have been exceptional. Satellite analysis by the EU’s Copernicus Atmosphere Monitoring Service show the heat intensity of the country’s fires on Thursday reached about 20 gigawatts, four times higher than the previous daily maximum.

“Those numbers are off the scale compared to the last 19 years,” said Mark Parrington, a senior scientist in the EU’s Copernicus Atmosphere Monitoring Service. He said the smoke from fires near Antalya and Mersin was now drifting to Cyprus.

Sunbathers watch as a helicopter carries water from the sea to dump on fires near Marmaris.

Sunbathers watch as a helicopter carries water from the sea to dump on fires near Marmaris. Photograph: Anadolu Agency/Getty Images

Residents of affected towns told reporters they had never seen anything like it. Ibrahim Aydın, a farmer, said he had lost all his livestock and nearly been killed while fighting the flames. “Everything I had was burned to the ground. I lost lambs and other animals,” he told the Daily Sabah. “This is not normal. This was like hell.”

Government ministers speculated that the cause may be arson attacks by the Kurdish separatist movement PKK, but provided no evidence. Few domestic reports mentioned broader climate trends that are heightening the dangers of fire in Turkey and elsewhere.

Climate scientists have long predicted the Mediterranean will be hit hard by rising temperatures and changes in rainfall, driven by human emissions. Future wildfire risk is projected to increase in southern Europe, according to the last report by the UN Intergovernmental Panel on Climate Change.

The Turkish climate scientist Levent Kurnaz said recent weather had created conditions for easy ignition. “The weather is extremely hot and dry. This helps to start fires. Our smallest mistake leads to great disaster,” he tweeted.

A wildfire on the southern Turkish coast near Manavgat, Antalya province.

A wildfire on the southern Turkish coast near Manavgat, Antalya province. Photograph: Kaan Soyturk/Reuters

The heatwave in southern Europe is expected to linger well into next week with some forecasts suggesting it could be among the most severe on record. The Turkish meteorological office sees little likelihood of respite in the week ahead. Next week, Ankara and several other sites are set for temperatures more than 12C higher than the August average.

Wildfires have already hit southern Greece, forcing evacuations of villages outside the western port city of Patras. Blazes are also reported in Bulgaria and Albania. High temperature warnings have been issued in North Macedonia, Albania, Bulgaria and parts of Romania and Serbia.

The EU has issued its highest fire risk alert to places in Italy, Portugal, Spain and parts of north Africa. Further east, a large fire broke out on Thursday in Lebanon, where one person has died.

“The risk is very high right now,” Parrington said. “We could start to see more fires in the coming weeks if these temperatures continue.”

Origin Energy slashes value of Australia’s biggest coal-fired plant due to impact of cheap renewables.

Extract from The Guardian

Shares tumble after company announces $1.5bn asset writedown and lower expected earnings

The logo of Australian energy company Origin is pictured in Melbourne, Australia
Origin Energy told the ASX it had cut the value of its power stations by $583m due to lower power prices.

Last modified on Fri 30 Jul 2021 15.17 AEST

Origin Energy has slashed the value of its assets, including Australia’s biggest coal-fired power plant, by more than $1.5bn as cheap power from renewables floods the national grid.

Company shares tumbled as much as 10% on Friday morning after Origin announced the writedown and lower expected earnings next year to the Australian Securities Exchange, before recovering slightly to be down about 7.85% about 12.45pm.

Origin owns Eraring power station in New South Wales. It is the company’s and the nation’s biggest coal-fired power plant, supplying NSW with about 25% of its electricity.

In a statement to the ASX, the company said it had cut the value of its power stations by $583m due to lower power prices “driven by new supply expected to come online, including both renewable and dispatchable capacity, impacting the valuation of the generation fleet, particularly Eraring power station”.

Pieces of coal

Eraring’s financial performance has also been hurt by a spike in coal prices, which came despite long-term decline in the industry.

Origin also cut the value of power purchase agreements by $995m due to lower electricity prices – which have hurt its profit margins on renewable energy – and lower domestic gas prices.

Coal assets are under siege in the Australian market, despite expressions of support from senior figures in the Morrison government.

In December the Japanese company Sumitomo wrote the value of Australia’s newest coal-fired power plant, Bluewaters, down to zero and in June the Queensland government warned that its state-owned plants would be unable to pay dividends within two years due to competition from cheap renewable power.

On the supply side, the mining giant BHP is trying to sell its energy coalmine at Mount Arthur in the Hunter Valley of NSW after slashing its book value down to almost nothing.

Origin is also set to pay $669m in previously deferred tax on its investment in Australia Pacific LNG, which operates coal seam gas tenements in Queensland’s Bowen Basin, with a 550km pipeline to port at Gladstone.

The company owns 37.5% of APLNG, with the US fossil fuel group ConocoPhillips also owning 37.5% and the remaining 25% held by China’s Sinopec.

The multibillion-dollar project has become profitable earlier than expected, meaning that Origin will have to begin paying tax on dividends reaped from its share.

Origin’s swingeing writedowns point to a tough year ahead for the company, which will reveal its 2021 financial results on 19 August.

The company’s chief executive, Frank Calabria, said next financial year’s earnings from its electricity and gas businesses would be almost a quarter lower than it previously expected.

Origin now expects earnings from electricity and gas of between $450m and $600m, compared with previous market estimates of about $710m.

“This is at least the third downgrade this year,” a Macquarie analyst, Ian Myles, said in a note to clients.

He said the company’s writedowns would provide a pathway to profit for the energy business “or at least an offset to lower APLNG returns if oil prices soften”.

Calabria said the 2022 financial year “presents challenges for the energy markets business, and we are responding by targeting significant capital and operating cost savings, including from the introduction of the Kraken [customer service] platform and new low cost and more efficient retail operating model, with customer migrations to the new platform continuing to progress very well”.

“The outlook for the business improves from next year, with Origin expecting to see a material rebound in energy markets earnings, based on the commodity price outlook and supported by disciplined cost management,” he said.

Tax cuts may ‘turbo-charge’ inequality but that’s a price Labor is willing to pay to win Coalition seats.

Extract from The Guardian

Katharine Murphy on politics

Australia news


Anthony Albanese wants to connect with people outside the progressive tribe – and to convince those who have left to return.

Australian Opposition leader Anthony Albanese

‘Labor will probably increase its chances of gaining power by avoiding a fight over tax cuts now.’

Last modified on Sat 31 Jul 2021 06.01 AEST

If you are a political tragic, you’ll likely have heard of Emma Dawson. If you are a civilian, allow me to introduce her. Dawson runs Per Capita – a progressive thinktank. Before that she worked for SBS and Telstra. After the corporate gigs, she worked as a policy adviser during the Rudd and Gillard governments.

A few months back, Dawson was asked by Labor party elders whether she would contest the seat of Melbourne at the next federal election – territory that is now a Greens stronghold. Her initial inclination was yes. But because she’s well connected, and can read the play, Dawson saw a significant problem coming down the line.

Labor was about to abandon its opposition to the Morrison government’s stage-three tax cuts, which predominantly benefit higher income earners and which Dawson had strongly criticised. A few days before Anthony Albanese announced Labor’s ultimate landing point, she abandoned the tilt.

The tax decision wasn’t the only factor behind her tactical retreat, but it was certainly one factor.

Dawson opposed Labor’s new position on principle, and given the Greens leader (and incumbent member for Melbourne) Adam Bandt was immediately on the attack about Labor’s politically “gutless” decision, the prognosis was obvious. She would enter an already difficult contest with too much weight in her saddlebags.

“I have been a strong and consistent critic of stage three of the Coalition’s tax cuts since they were announced in the 2018 budget,” Dawson told me this week. “They will turbo-charge income inequality and remove significant annual revenue from the federal budget at a time when our focus should be on investing in a better future on the other side of Covid-19.”

Dawson says she remains “strongly of the view” that the election of a majority Labor government is fundamental to making Australia “a more equal, caring and sustainable society”.

But she says there were significant structural problems in the economy long before Covid arrived – “soaring house prices, stubbornly low wage growth, high unemployment and growing underemployment, insecure work, the undervaluing of care and the need to move urgently to decarbonise our economy”.

These are big policy challenges, Dawson says, “that can’t be fixed with more trickle-down tax cuts”.

On the substantive policy point, Dawson is absolutely right. The stage-three tax cuts make Australia’s tax system less progressive than the status quo, and they are fiscally unsustainable.

Her implicit point is also correct. Right now, at this point in history, governments need to prioritise having the fiscal firepower to ensure Australia can grow sustainably after the twin shocks of the global financial crisis and the pandemic.

They also need to maintain a laser-like policy focus on ensuring that inequality here doesn’t get any worse, because the slippery post-truth age that we inhabit, the dangerous resurgence of demagoguery that reached an apotheosis globally when Donald Trump attained the US presidency, has its origins in rising inequality, wage stagnation and anaemic economic growth.

So how did it come to this?

Labor began its long stage-three internal deliberation with senior players hoping they could square their own values circle by keeping the bulk of the government’s tax cuts while imposing a higher rate on Australia’s highest income earners. But in the end, that wasn’t the majority view.

During the last parliamentary term, when Labor believed it was the government in exile, rising to meet a social democratic moment that never materialised, there were rolling, substantive policy deliberations on a huge number of complex offerings.

But after the bitter defeat in 2019, some policy deliberations, like the tax conversation, have become more like risk assessments – how can this particular commitment be weaponised against us?

It would be wrong to present Labor’s tax landing point as all about defence, though.

This decision also says something about where Labor wants to position itself politically in the looming battle with Scott Morrison.

Whoever wins the next election will have to deal with the reckoning that comes on the other side of this crisis

I began this column with Emma Dawson. That vignette highlights the negative impact of this week’s tax decision on any Labor-Greens contest in Melbourne, and seats like Melbourne.

Now Labor would love to get Melbourne back. But that isn’t the current campaign objective. Anthony Albanese is a progressive who holds a progressive seat at risk of falling to the Greens. But if you listen to what Albanese has been saying for a number of years now (and I recommend you do, because it’s not a manufactured talking point, I’m confident he means it) his near constant refrain is progressive people have to stop churning unproductively inside their own bubble.

Change is made when minds get changed. Applying the Albanese doctrine to the political arena, he means Labor wins elections when it can connect with people outside the tribe, and when it can convince people who have left the tribe to come back. Labor isn’t focused on winning progressive-held seats. It wants (and needs) to win seats held by the Coalition to form government.

When marginal seats holders attended a digital training session run by Labor’s national secretary Paul Erickson back in May, Michelle Rowland – the frontbencher who holds a western Sydney seat on a margin of under 3% – asked him to articulate the pathway to victory at the next election. Erickson told her the campaign would target Coalition-held seats in the outer suburbs and the regions. The targeted voters were working families worried about making ends meet.

With those objectives front of mind, during the deliberation about tax, Rowland told her colleagues she did not want to be standing on a pre-poll booth in Blacktown, talking to the targeted voters, defending tax increases – either real tax increases, or even worse, the fictions, like the death tax, which was the weaponised version of Labor’s franking credits policy in 2019.

If Labor did that again, Rowland’s view was Morrison would win. That was the view that ultimately prevailed.

Not everybody is on board with the decision. Revenue from tax increases funds spending, and there are always lots of spending priorities. In an environment where debt and deficit has lost its salience because the pandemic has re-written the rules, Labor will have some room to move, even without the revenue measures to bankroll the investments, particularly if it can find largesse, like discretionary grants programs, to offer up as savings.

But whoever wins the next election will have to deal with the reckoning that comes on the other side of this crisis.

Labor will probably increase its chances of gaining power by avoiding a fight over tax cuts now.

But ultimately, once Australia has moved into whatever Covid-normal looks like, the next federal government – whether it’s led by Morrison or Albanese – will have to face up to the challenges Dawson nominated as compelling reasons why nations should not diminish their fiscal firepower by giving tax cuts to people who don’t really need them.

As the COVID crisis deepens, effective advocacy and leadership are missing – and the public is paying the price.

Extract from ABC News 

Analysis

By Laura Tingle
Posted 
Scott Morrison holds up a document during a night-time press conference at the Lodge
'Not a race': Scott Morrison has urged Australians to "go for gold" on "getting those vaccination rates where we need to go".
(AAP: Lukas Coch)

It seems to have been a bit hard for the federal government to find anything useful to say this week as things have gone so pear-shaped in NSW. 

Premier Gladys Berejiklian, her Health Minister Brad Hazzard and Treasurer Dominic Perrottet have daily floundered between pleading with people to comply with restrictions, pleading for them to get vaccinated, trying to insist the strategy is working in the face of a relentlessly rising trend line, and pleading with the federal government for more vaccines and economic help.

There was the belated offer of financial assistance from the Morrison Government — once they were sure Victoria and South Australia were not also going to succumb to major COVID outbreaks — and the rapid move by Treasurer Josh Frydenberg to make sure things had been positioned so that if the national economy does once again slip into recession, everyone will know it's NSW's fault.

There were some more of the "look into my eyes, not at my hands" announcements from the Prime Minister about extra vaccine doses for NSW from a national stockpile which may or may not exist, depending on the day of the week.

And from the man who repeatedly insisted the vaccination rollout was "not a race", there was the urging of Australians to "go for gold" on "getting those vaccination rates where we need to go".

Gladys Berejiklian addresses the media

Gladys Berejiklian has been pleading with people to comply with COVID restrictions in NSW.
(AAP: Lisa Maree Williams)

Retreating behind more modelling

Having contributed so splendidly to undermining the credibility of AstraZeneca, and confusing people about whether they are or aren't able to — or should — access vaccines which may or may not be available, the government has retreated behind the barriers of more modelling than you can wave a laser pointer at, as it prepared for a national cabinet meeting on Friday.

Not only is expert scientific advice coming from the Doherty Institute, with modelling showing what vaccination rates will enable society to reopen, we were breathlessly told that there will be "tempering" advice from the Treasury about the economic cost of maintaining restrictions.

"It's a big departure from relying solely on the health advice," a federal government source was quoted as telling the AFR, as if this was some major advance in sophisticated policy making.

With all that talk about lockdowns being a thing of the past seemingly being a thing of the past, and replaced with talk about lockdowns being a thing, at least until early next year, there was a sense that all this modelling and advice of themselves could provide us all with a reassuring sign of the same import as the Miracle of the Juniper Bush in Monty Python's The Life of Brian.

Meanwhile, on the other side of politics, Labor was quietly and finally dumping signature policies — from changes to negative gearing, to a reduced discount on the capital gains tax, and its resistance to tax cuts due to start in 2024, which will benefit higher income earners.

Hard to believe, true, but Labor was quite open about the fact that it didn't really want to talk much about the decisions this week. Decisions that were quite openly designed to remove any reasons for voters to not vote for Labor at the next election, and to just keep the focus on the government and its handling of the pandemic. And decisions which even further remove any obvious policy difference, or ambition, between the major political parties.

COVID is drawing attention to deficiencies

The pandemic, of course, dominates all in our lives at the moment, even as it draws attention to the inadequacies or deficiencies of governments (various) and our institutions and health and support systems.

One of the curious things about this pandemic is that it feels a bit like it has turned a lot of the complaints about all those systems on their heads.

We've all heard it for years: the incapacities to achieve reform, the problems in the way the country works, have all been the fault of, among things, the federation, the Senate, a bloated public sector.

Two women walk down Pitt St Mall

The pandemic dominates all in our lives at the moment.
(AAP: Joel Carrett)

Yet as the pandemic has gone on, it has been increasingly and repeatedly the states that have had to save the federal government from its own incapacities and incompetence.

This isn't a partisan observation about the incompetence of the federal government. Voters can have their own say on that.

But it is a comment on the fact that the dismantling of much of the post-world war administrative capacity and infrastructure of the federal government has found it repeatedly unable to run quarantine systems, vaccination rollouts or perhaps even public health responses more broadly.

It is an interesting point in time to consider why we were finding it so difficult to achieve change in the past few decades.

It's not a matter of whether some of the oft-discussed "reforms" are a good idea, just reflecting on why they were so mechanically difficult.

What's missing?

John Daley has led the non-aligned policy think tank, the Grattan Institute, for the past decade. And for his swansong piece of research he has gone back and looked at what factors blocked reforms promoted by both Grattan and the OECD between 2009 and 2019.

More than two-thirds of the suggested reforms have not been adopted. And his findings are that it has not been budgetary cost, parliamentary obstacles, federalism, or even vested interests that have been predominantly responsible. It has been popularity.

"Unpopularity has become an insuperable obstacle to reform, a significant change from the past when political leaders implemented many reforms even if they were unpopular, doing their best to explain why they were in the public interest," he says.John Daley

John Daley says the most crucial blocker of reform has been adverse public opinion.
(Four Corners)

There are other factors, of course. But Daley's analysis of reforms from 2009 to 2019 "reveals clear patterns of both success and failure".

Of the 23 reforms that were substantially implemented, none were unpopular, none were actively opposed by powerful vested interests untempered by substantial independent evidence, only one ran counter to a party shibboleth, and only one involved a big budget outlay.

The upper house of parliament only stymied two reforms "that probably would not have been blocked anyway" and federalism was "probably only significant for six reforms, and all of these would probably have been blocked anyway by other forces such as partisan shibboleths or powerful vested interests untempered by high-quality public evidence".

The most crucial blocker, Daley says, has been adverse public opinion: "For the past decade, public opposition invariably doomed a proposal for reform."

What's missing? Well, Daley doesn't really say it out loud quite this way, but effective advocacy and leadership. As in, leaders arguing the case for a change and why the inevitable trade-off it represents is worth it for the common good.

A bit like trying to argue just now the merits of science and economics on lockdowns. We are paying the price for an inability to learn from earlier experiences, particularly that of Victoria, from a failure to persuade elsewhere in the country, and from our leaders failure to find anything useful to say.

Laura Tingle is 7.30's chief political correspondent.

Energy retailers are being clobbered. Here’s why that’s good news for you.

Extract from The New Daily 

Finance News

Updated:
energy prices
The hit to fossil fuels from renewables could be a consumer opportunity

Australia’s big listed energy companies are being clobbered as new renewable energy production moves into the market – and you stand to benefit through lower energy prices.

Just a little over three years ago, in January 2018, Big Coal accounted for 72.3 per cent of Australia’s electricity production while wind and solar represented 10.1 per cent.

In May this year, coal had shrunk to 64.2 per cent of the market while renewables more than doubled to 22.3 per cent, according to figures provided by Hugh Saddler, honorary professor at ANU’s Centre for Climate Economics and Policy.

What is remarkable about that is the shift to renewables continues despite the fact that the subsidy arrangement, known as the Renewable Energy Target, ran out in January this year.

But the falling costs of renewable energy production mean that private sector operators continue to build new wind and solar plants at record levels.

“Renewable energy is now coming into the market at very low prices, around 35c per kilowatt hour. That is below the marginal cost of running some existing coal stations,” said Andreas Lundberg, energy analyst with Montgomery Investment management.

That means it is cheaper to build new renewables than it is to run many existing coal-fired power stations, so renewable energy is knocking coal out of the market and pushing power prices down.

That is starting to show up in the share prices of major coal generation owners Origin and AGL. Origin on Friday announced it was writing down the value of its generation assets by $1.6 billion and has seen its share price fall from $4.6 to $4.1 in a month.

Origin Energy’s share price was hit when the company announced it would write down its generation assets. Source: Commsec

Its market heavyweight partner, AGL, has more than halved in value over the past year, falling to $7.23 as of Friday’s closing bell. Investors hit AGL because they are unconvinced by its plan to split its coal assets from energy retailing operations.

“The big companies are being squeezed between a rock and a hard place, with renewable energy pushing down the wholesale market price. At the same time we’re seeing gas and coal prices go up,” Mr Lundberg said.

The rise in gas prices is being triggered by growing sales of liquid natural gas into export markets while coal prices are also being influenced by offshore demand.

So the costs of the coal and gas generation owned by the Big Two is rising while prices are falling.

Energy prices: A consumer opportunity

The rush of new renewables in the market at a time when the big firms are under pressure is a good thing for consumers.

“Competition in the market is strong enough to stop AGL and Origin pushing prices up,” Mr Lundberg said.

“Now that a standard rate is being published with retailers discounting against that, it is time to look around. I recently got a deal that was 5 per cent below what I was first offered.”

AGL hits trouble

AGL’s move to split in recent times is striking trouble because it is behind the times internationally and has been caught out by a change in politics in the United States under President Joe Biden.

“With the Biden election the political landscape has changed dramatically with the realisation that carbon has become a big issue in electricity starting to dawn here in Australia,” said Bruce Mountain, energy policy professor at Victoria University.

That realisation has belatedly made AGL act to try to split its coal business from retailing and renewables because it is the only way it will be able to fund a future in renewables.

“A bunch of large power companies in Holland, Germany, Italy and Spain all restructured five to 10 years ago to split off fossil fuels from their new energy portfolios,” Professor Mountain said.

AGL was very late to the renewables party and its shares have fallen. Source: Commsec

“They had to do that to attract the new investment into renewables because investors didn’t want to buy into a company with a whole lot of fossil fuels,” Professor Mountain said.

So their strategy was to hold fossil fuel operations that would gradually decline in a separate company that didn’t have to attract new investors.

AGL has woken up to that reality recently, Professor Mountain said.

“AGL, which has been underweight wind and solar generation as a proportion of their total output by far, suddenly found that in order to compete in the new world they’re going to need lots of capital because they’ll have to build or buy renewable capacity,” he explained.

Ratings agency Moody’s advised investors the move will weaken the power-generation arm at a time of mounting physical and regulatory risks from climate change.

AGL’s business profile will undergo a structural weakening over the next 12 to eight months should the demerger be executed,” Moody’s said in a report.

The government’s Energy Security Board has just recommended what Energy Minister Angus Taylor called a “capacity mechanism” to pay coal and gas power stations to stay in the market and guarantee supply.

The plan, yet to be formally released, “is a clumsy, blunt instrument without necessary components to encourage new forms of generation or new forms of supply firming. Rather it is just getting the old generation types to provide that,” said Professor Saddler.

Friday 30 July 2021

Bolsonaro’s 1,000km Amazon railway will cause climate chaos. It must be stopped.

Extract from The Guardian

Opinion

Amazon rainforest

This project would rapidly deforest large areas of the Amazon, which would wreak havoc on the planet.

‘Today, almost 15% of the Amazon rainforest has already been deforested. When this number reaches 20%, the entire Amazonian system will collapse.’

‘Today, almost 15% of the Amazon rainforest has already been deforested. When this number reaches 20%, the entire Amazonian system will collapse.’

Last modified on Thu 29 Jul 2021 16.38 AEST

Despite increasing global concern, Jair Bolsonaro is determined to expand his exploitation of Brazil’s crucial natural resources. His latest project, one of the most destructive yet, would rapidly deforest large areas of the Amazon.

Bolsonaro’s plan? To construct a 1,000km railway system extending right into the heart of the Amazon rainforest – with trains passing within 500 metres of 726 official environmentally protected areas. The new railway, called Ferrogrão, would also entail construction within 10km of another 18 priority conservation areas established by the ministry of the environment.

The pretext for Bolsonaro’s environment-destroying plan is a problem that, while real, could be easily addressed through far less harmful measures. Currently, soybeans and other grains grown in the Brazilian midwest must travel a considerable distance – 2,000km – to reach seaports in the states of São Paulo and Paraná. The proposed railway would reduce transport costs and increase the competitiveness of these products in the international or national market by roughly 8%.

This underscores a key point of tension between Brazil and the international community. One reason the Amazon, a massive carbon bank, is so crucial to global climate policy is that countries in the global north became rich by exploiting their own natural resources, including through massive deforestation. Now that western European and North American countries are economically developed, they demand that Brazilians not do what they did: exploit our environmental resources so that we, too, can thrive economically. Many Brazilians, understandably, resent the hypocrisy.

It is true that Ferrogrão, like so many of Bolsonaro’s projects, will result in serious environmental harm to the Amazon and thus the world. Yet it is not enough for western governments and environmental NGOs to lecture Brazil; they should compensate us for the economic costs of the environmental protection we must undertake on the whole planet’s behalf.

According to research by the Climate Policy Initiative and PUC-Rio, a Brazilian university, constructing Ferrogrão won’t just consume massive amounts of land; it will also encourage development on land around the railway. Under Bolsonaro’s current plan, this construction project will result in up to 2,043 sq meters of deforestation – about 285,000 soccer fields – which will increase carbon emissions by 75m tonnes. There are economic costs, too: according to World Bank projections, each tonne of emission costs US$25 – so Brazil would lose at least $1.9bn with this project. And that forecast is conservative.

Since Bolsonaro was inaugurated in 2019, deforestation has been the centerpiece of his environmental policies. In 2019, deforestation grew 85%, a record high in the past five years. In 2020 the National Institute for Space Research (INPE), a federal agency relentlessly attacked by Bolsonaro, recorded new increases of 9.5% in devastated areas. And INPE has announced that deforestation rate in April was the worst for that month in the past six years.

Opponents of Ferrogrão may have the law on their side. By altering the territorial limits of the Jamanxim National Park, the project may violate the Brazilian constitution. My political party, the Socialism and Liberty Party (PSOL), brought a constitutional challenge before the federal supreme court, which has temporarily suspended Ferrogrão pending further proceedings. Brazilian law also requires prior approval of the project by the federal audit court. Brazilian civil society and indigenous groups have mobilized against judicial approval.

Bolsonaro’s plan has completely excluded the indigenous tribes most affected. That is not only unethical but an added opportunity to induce a court to stop the project: an agreement signed by Brazil requires indigenous tribes be consulted on public policies that affect their lives and territories. This hasn’t happened.

Brazilian law also requires that environmental impact studies be prepared for any significant new project. The environmental impact study for Ferrogrão found that it would have a disastrous impact on the lives of indigenous peoples and on the environment. Environmental harms include interference in environmental protection areas, disturbance of fauna (the affected region includes at least 14 species at risk of extinction), fragmentation of habitats, destruction of native flora and contamination of water. The railroad would also increase the flow of cargo across the Xingu Indigenous Park, disrupting the lives of the Kayaopós people.

Standard environmental mitigation projects might be able to reduce some of these harms. But that is unimaginable in the current Brazilian political context: the Bolsonaro government has proved countless times its indifference to environmental issues and contempt for indigenous peoples. Bolsonaro governs according to the agribusiness interests that played a crucial role in financing his 2018 campaign and will no doubt help determine the success of his 2022 re-election bid.

Ironically, the titans of agribusiness should want to preserve forests. The rain that falls over the midwest of the country, up to the La Plata basin, is in part a product of the Amazon. Roughly 390 billion trees constantly pump water from the Atlantic into the atmosphere, creating so-called “flying rivers”. This moisture flows to the Andes, then forms rain, which supplies Brazil’s main hydrographic basins. Fewer trees mean less rain, and therefore less productivity and profit for agriculture.

Given the international interest in protecting the Amazon, it is not enough that only Brazilians fight the construction of Ferrogrão. Following a letter we sent US senator Bernie Sanders, members of the Progressive International are arriving in Brazil on 15 August. The Amazon forest affects the whole world’s climate. Brazil has the largest tropical forest in the world, and its trees constitute one of the largest carbon banks. The more deforestation that is permitted, the more carbon dioxide goes back into the atmosphere. And we know well the consequences: climate chaos.

Like the global climate itself, the Amazon is on the brink of disaster. The immensity of the Amazon rainforest – 5.5m sq kilometers, 1m sq kilometers larger than the total area of the European Union – makes it easy to believe that it is too large to be meaningfully harmed. But the same “flying rivers” that rain across South America also sustain the forest itself. Today, almost 15% of the Amazon rainforest has already been deforested. When this number reaches 20%, the entire Amazonian system will collapse, with a direct impact on the entire planet. There will be no return.

  • David Miranda is a member of the Brazilian congress for the Socialism and Liberty party and a Guardian US columnist.

Australia’s energy market operator plans for net zero by 2050 as Morrison stalls.

Extract from  The Guardian

Aemo says new planning scenarios, including a ‘hydrogen superpower’ option, reflect accelerating transition in energy market

The Australian Energy Market Operator has added new mid-century planning scenarios – including net zero by 2050 and a ‘hydrogen superpower’ option – to its forward planning.
The Australian Energy Market Operator has added new mid-century planning scenarios – including net zero by 2050 and a ‘hydrogen superpower’ option – to its forward planning.
Political editor

Last modified on Fri 30 Jul 2021 03.31 AEST

While Scott Morrison is yet to give a formal commitment to achieving net zero by 2050, Australia’s energy market operator has added the mid-century scenario to its forward planning.

In its latest Inputs, Assumptions and Scenarios Report, released on Friday, the Australian Energy Market Operator (Aemo) has added new planning scenarios – including net zero by 2050 and a “hydrogen superpower” option.

Aemo’s chief system design officer, Alex Wonhas, said the updated scenario planning reflected the accelerating transition in Australia’s energy market and “overwhelming” calls from stakeholders for the energy market operator to produce scenarios “to reflect the observed rapid decarbonisation of the energy sector and pathways to achieve net-zero emissions across the economy”.

Coal being processed

Stakeholders say Aemo initially floated a more prominent transitional role for gas in line with the Morrison government’s “gas-fired recovery” rhetoric, but this idea was resisted during consultation. Aemo spent 10 months consulting with consumer groups, governments, individuals and industry on its plans.

Ahead of the release of the new scenarios on Friday, Wonhas said there was “no doubt the energy transition is forging ahead” and “we have tried to capture this through a range of scenarios characterised by the growth of electricity demand and the pace of decarbonisation”.

He said Aemo had developed “two central scenarios” – one forecasting “steady progress” with the transition led by existing government policy, corporate abatement goals and continued growth in home solar uptake.

The second, net zero, was “driven by accelerating technology-led emission abatement based on extensive research and development, policy and progressive tightening of emission targets to meet an economy-wide net zero target by 2050”.

“We have also mapped out a progressive hydrogen superpower scenario based on a power system to support the development of a renewable hydrogen export economy,” Wonhas said.

The net zero scenario outlined by Aemo says domestic action towards that end point would be driven by “technology advancements” – an observation in line with government messaging.

It plots the bulk of the transition happening in the 2030s and 2040s rather in the current decade, noting that “short-term activities in low emission technology research and development enable deployment of commercially viable alternatives to emissions-intensive activities in the 2030s and 2040s, with stronger economy-wide decarbonisation, particularly industrial electrification, as 2050 approaches”.

Part of the transition would involve electric vehicles becoming “more prevalent over time and consumers gradually switch[ing] to using electricity to heat their homes and businesses”.

Morrison is under considerable diplomatic pressure to make a stronger commitment to emissions reduction at the Cop26 in Glasgow later this year. The prime minister says he wants to achieve net zero, “preferably” by 2050, with the transition to be delivered by technology “not taxes” – a mantra that is repeated on high rotation, even though no major party is proposing a carbon tax.

But it is unclear whether that aspiration will win the day, with some Nationals resisting any formal commitment.

In Aemo’s “steady progress” scenario, the transition is driven by “existing government policy commitments”, by the choices of consumers, predominantly through household solar uptake, by the abatement activity of businesses “and technology cost reductions”.

The point of Aemo producing scenarios is to help investors and policymakers understand market trends, which drives investment decisions in generation, transmission and storage.

One of the factors Aemo took into account was the impact of the pandemic. On its “slow change” scenario, global economic growth remains suppressed because recovery from the pandemic is slow, and countries retreat into isolationism and protectionism.

That pessimistic scenario sees government policy in Australia focused on “supporting the ailing domestic economy, with decarbonisation policy being less of a priority” and internationally the world falls short of current decarbonisation objectives under the Paris agreement.

Having spent a decade framing emissions reduction in apocalyptic terms, the Coalition now has to present different facts
Katharine Murphy
Katharine Murphy

The worst-case scenario is countered by two upbeat alternatives – a “step change” scenario where there is coordinated “economy-wide action that efficiently and effectively tackles the challenge of rapidly lowering emissions”.

In the “hydrogen superpower” scenario, there is “strong global action towards emissions reduction, with significant technological breakthroughs and social change to support low and zero emissions technologies” and “renewable energy exports via hydrogen become a significant part of Australia’s economy”.

It says the object of the exercise was to identified five “plausible, distinct, internally consistent scenarios that cover a broad range of potential future worlds that could materially impact the energy sector”.