The question that should be dominating debate is how quickly Australia can replace gas with renewabl
The fossil fuel industry’s campaign of naked self-interest has failed to get traction. Could this be a turning point?
‘Gas used to be cheap but quickly became expensive in eastern Australia after the creation of a large export industry in Gladstone, Queensland.’ Photograph: Lee Smith/Reuters
Much has changed when it comes to climate and energy in Australia during 2022 but the country ends the year still needing an honest conversation about gas – what it is, the damage it does and the extent to which it is needed in the future.
Last week may eventually come to be seen as a marker of a change in how the country thinks about fossil fuels. The gas industry, backed by the Coalition and some news media, launched a campaign of naked self-interest against government plans to limit the impact of skyrocketing gas prices that echoed successful campaigns against carbon pricing and an increased mining tax a decade ago.
It is early days but the initial evidence suggests it failed to get the same traction. While this is a welcome development, much of the debate about gas continues at arm’s length from basic facts.
Though marketed as a “natural” fuel, gas sits alongside coal and oil as one of the main drivers of the climate crisis. Emissions from burning gas are usually described as about half those from black coal but the evidence says its global impact is greater than this, in part due to methane leaks. Methane is a particularly potent greenhouse gas, responsible for about a third of all global heating since the industrial revolution, and the head of the International Energy Agency last year concluded that the world shouldn’t be opening new gasfields if policymakers are serious about meeting the globally agreed goal of limiting global heating to 1.5C.
Put bluntly, digging up and burning more gas isn’t sustainable. Claims to the contrary are usually made from a position of arrogant luxury, divorced from the already real-world impacts of worsening extreme weather events.
This doesn’t mean Australia can stop using gas overnight. Alternatives are available and in some cases are cheaper but the fossil fuel is used to run equipment that each day keeps people fed, warm and in work. It can’t just be turned off.
We have gas infrastructure due to historic availability, habit and ideology but there is nothing intrinsically good about it. There is evidence, for example, that using gas at home for cooking significantly increases the risk of respiratory disease. The question that should be dominating public debate is: how quickly can it be replaced? Also: how much do we need until then, how do we get it and how do we make sure it is affordable?
Climate impact aside, the affordability question is central. Gas used to be cheap but quickly became expensive in eastern Australia after the creation of a large export industry in Gladstone, Queensland, early last decade. The domestic price tripled as it became linked to what could be charged in north Asia. That was bad enough for businesses that relied on it. Things spiralled further after Vladimir Putin invaded Ukraine.
Russia had provided about a quarter of the global liquified natural gas trade. As the war prompted European countries to look for other sources of gas, competition on global markets increased and prices headed for the stratosphere. Europe responded not just by chasing gas but also by introducing some energy conservation measures, extending the operating life of some coal and nuclear plants and, crucially, accelerating steps to move away from gas. A forecast suggests this is having a major impact – that by 2030 Europe will not only have ended its reliance on Russian gas but be using less gas from non-Russian sources than previously expected at that date.
You wouldn’t know this shift was under way from listening to gas industry leaders in Australia, who continue to talk as though expansion is the only way ahead. They have been reaping significant war profits and resisting calls to ease the cost burden on households and local business.
It has been said a lot over the past week but is worth repeating: the $12-a-gigajoule cap on the domestic gas price legislated by federal parliament last week still allows fossil fuel companies to charge a higher rate to Australian customers than they did in nearly all cases last year. The cost of production has not increased. There is nothing looming that prevents the gas industry from continuing to turn a healthy profit.
Some groups have argued that the Albanese government didn’t go far enough. The Institute for Energy Economics and Financial Analysis has called for the cap to be set at $7 a gigajoule to ensure small manufacturers do not go under in the next six months. But these sorts of businesses have not been front and centre in the debate, which tends to elevate the views of fossil fuel bosses above others.
The main complaint of the gas industry has been about a code of conduct including a “reasonable pricing” framework that could give the government indefinite powers to intervene in the market. Santos’s Kevin Gallagher described it as a “Soviet-style policy” that could chill investment.
The only sensible response would be to say: seriously, c’mon. About 80% of the gas extracted in Australia is either exported or used by the export industry. The government has indicated – contentiously, from a climate perspective – that it doesn’t plan to stop new developments based on their emissions. For now the biggest risk to gas companies is not local action, but whether global demand for fossil fuels falls faster than they expect.
A big question for next year is whether this will change. Could the government, given its strong support on the global stage for the 1.5C goal, do more to encourage its trading partners to rapidly embrace renewable energy while pushing a more rapid change at home as existing fields were depleted?
Official forecasts of future use are only a rough guide but experts say is it is reasonable to expect a gas shortfall in the eastern states in the next few years even if ambitious policies to move away from fossil fuels are introduced.
The best way to address this may be a step that on the surface seems ridiculous – building temporary LNG import terminals that can bring gas from northern Australian fields to the south. While the LNG price is through the roof, there is a case that this would still be less damaging, cheaper and easier to dismantle than opening up reservoirs.
But this would only make sense if it was combined with policies that drive households and businesses away from gas and towards renewable electricity – and some of these are now taking shape.
In the electricity sector, federal and state energy ministers have agreed to introduce a capacity investment scheme that will underwrite batteries and other energy storage and could diminish the role of gas. At a household level, the federal and Victorian governments are promising packages to help consumers move from gas to electric appliances. A planned revamp of the safeguard mechanism should boost efficiency and cut fuel use in gas-reliant heavy industry and manufacturing.
Added up, these measures could start to build a case that Australia does not, despite all the claims, need new major fossil fuel developments to meet its energy needs. Expect this to be a big focus in 2023.