Saturday, August 28, 2010

Ian Dunlop on our great strategic error

On 20 August 2010 Australia 21 Director Ian Dunlop contributed the following piece to the ABC News website The Drum. The original piece plus posted comments can be accessed here.

Our great strategic error

"Management", according to the late Peter Drucker, the renowned US social ecologist, "- is doing things right. Leadership is doing the right things". So how does Australia measure up in these terms as we contemplate the leadership we deserve prior to the election?

We have had a dream run since World War II, built on our natural wealth. Despite the occasional hiccup, our economy has expanded year after year, with increasing prosperity. Understandably we are proud of being world leaders in agriculture, mining and processing, and we have created a strong and vibrant society in many other areas.

Despite periodic cock-ups, we can claim to have done well, excelling at doing things right, and doing the right things, albeit within a rather narrow, resource-dominated, vision. That is until about 15-20 years ago when the world began to hit the environmental and resource limits that will dictate the evolution of society through the 21st Century.

Our resource base is formidable and expanding. But that bounty is fast becoming our Achilles heel. Our exports and domestic energy systems are carbon extensive; our per capita carbon emissions are amongst the highest in the world. Our most vulnerable point is oil; we are around 50 per cent self-sufficient, declining rapidly unless new discoveries save the day, which seems unlikely. But peak oil, which may well mean a 20-30 per cent reduction in oil availability by 2030, is not even on the agenda of the major political parties.

If the world now moves rapidly to a low-carbon footing due to the need for an emergency response to climate change, whilst facing increasing oil scarcity due to peak oil, many of our traditional advantages turn into major strategic risks; that is risks beyond our control which have the potential to fundamentally change our way of life, and undermine our economic strength .

Our raw material exports will not cease overnight, but a shift toward low-carbon alternatives will seriously disadvantage Australia's current business model as carbon sequestration technologies inevitably fail to match their over-hyped expectations. Similarly, we will not find it easy to secure the oil imports we require; conversion of coal, and to a lesser extent gas, will be expensive and environmentally damaging.

Such a scenario, of rapid climate change combined with the onset of peak oil, whilst becoming part of mainstream thinking overseas, is still regarded as extremism in Australia, and certainly not part of the "official future" of the major parties.

Meanwhile the resource sector, buoyed by bullish forecasts of coal and gas demand are forging ahead with fossil fuel developments; doubling coal exports over the next twenty years, expanding LNG exports and establishing a coal seam gas industry with major investment in mines, railways, ports and processing facilities - but with no proven means of sequestering the associated carbon emissions.

So Australia ends up in the worst of all possible worlds. Science is clearly indicating the need for radical emission reductions. Vested interests ignore these calls, continue to undermine any sensible reform and, by special pleading render ineffective even the minimalist reform proposed in the interests of short-term advantage. Lack of certainty on a carbon price stunts the growth of fledgling alternative energy industries, stifles consumer behavioural change and, combined with conflicting regulatory measures, leads to non-optimal short-term decisions, while both main political parties lack the stomach to take on the vested interests. So we fall back into the comfort zone of our dig-it-up and ship-it-out high carbon mindset. In so doing, we are making arguably the greatest strategic error in Australia's history.

For whilst Australia is moving backwards on climate change reform and ignoring peak oil, the rest of the world is vying for leadership of the low carbon economy. A decade hence it is likely that the incremental demand for our high carbon products will have evaporated. At that point we will be left with a large inventory of stranded assets, minimal investment in low carbon alternative energy, little resilience to weather the impact of both climate change and peak oil and strident calls to bail out companies that are "too-big-to-fail".

The irony is that Australia has some of the best resources and greatest opportunities to benefit in the low-carbon world, which we seem determined to ignore - renewables, new generation nuclear, and innovative technologies we have never even thought of which will come out of the woodwork once a clear strategic direction is set.

There are also far wider benefits in moving away from the domination of fossil-fuels. A complete reappraisal of our lifestyle, which is long overdue, becomes both inevitable and desirable. It is not just high oil prices and climate change, but the very question of the sustainability of humanity on the planet as population rises from 6.5 billion people today to 9 billion in 2050, all aspiring to an improved quality of life. New technology will undoubtedly come to our aid but that will not be enough - our values must also change. Conventional economic growth in the developed world will have to be set aside in favour of a steady-state economy where the emphasis in on non-consumption and the quality of life rather than the quantity of things.

There will be far more focus on local food production, opening up new opportunities for rural areas, cities will be re-designed using high-density sustainability principles to avoid urban sprawl, and integrated with public transport to minimise energy consumption. Work centres will be de-centralised. Rail, powered by renewable energy, will become a major transport mode for both freight and high-speed passenger traffic. Air travel will reduce unless new technology develops jet fuel from, for example, bio sources, and even then emission constraints may limit its use. The internal combustion engine will disappear in favour of electric vehicles for many applications. Cycling and walking will become major activities for both work and pleasure - obesity and diabetes will decline!.

The challenge is enormous, but it is the greatest opportunity we have ever had to place the world on a sustainable footing, for what we are currently doing is not sustainable. We must not waste this opportunity, but it needs far bolder and broader thinking than we are seeing at present.

In Drucker's terms, we are becoming ever better at doing things right, but failing miserably at identifying the right things to do. A triumph of management over leadership, driven by nonsensical short-termism. The time has come for a radical re-think of our strategy for the 21st Century.

These are the issues that our potential leaders should be debating before we have to choose. In particular, serious discussion on what a sustainable population really means.

Ian Dunlop is a Centre for Policy Development Fellow and a contributing author to their recent publication, More than Luck: Ideas Australia Needs Now.

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