With a projected cost of more than US$1 trillion, it may be the most ambitious infrastructure project undertaken in human history. The country hopes it will all be completed by 2049, the 100th anniversary of the founding of the People’s Republic of China. My research in international economics with particular reference to China shows that Beijing has both economic and political plans for how these investments will pay off.
A rapidly growing China needs reliable access to energy. The Belt and Road Initiative includes pipeline construction and other building projects in oil- and gas-rich central Asia.
As these countries get more closely tied to the Chinese economy, they also shift into the range of its political efforts, sparking several concerns about the country’s motivations. Navy analysts have called China’s growing control of ports in Asia – including Hambantota, Sri Lanka; and Gwadar, Pakistan – an effort to assemble a “string of pearls” with which it can dominate much of Asia.
Recent reports suggest that Chinese investment in the Belt and Road Initiative – and international interest in Chinese funding – is slowing. In part that may be because, predictions and analysis aside, nobody knows for certain what China is aiming for – except to boost its own side in its rivalry with the U.S.
Chinese investment in Australia fell 36% in 2018, to A$8.2 billion (US$6.2 billion) from A$13 billion (US$10 billion) in 2017, according to research by KPMG and the University of Sydney Business School.
This is despite Chinese investors still generally regarding Australia as safer and more attractive than most other countries. So 2018 need not be a turning point. But it is cause for reflection.
Discussion about Chinese investment in recent years has been dominated by political and security concerns. These concerns need to be balanced by the national interest in economic prosperity. Chinese investment creates jobs, increases export opportunities and deepens relations with our most significant trade partner.
Arguably the pendulum has to swing back to thinking about the economic benefits. We need a more balanced national conversation.
Many losers, one winner
Our data covers direct investments through mergers and acquisitions, joint ventures and new projects. We do not include portfolio investments, such as buying stocks and bonds, which do not result in foreign management, ownership or legal control. Nor do we include residential property sales.
In the mining, agribusiness and services sectors investment fell by more than 90%. In renewable energy it fell by 48%, and in commercial real estate by 31%.
The only sector where investment did not fall was health care, where investment more than doubled to A$3.4 billion. This made health care the biggest investment sector, attracting 41.7% of all Chinese money, relegating commercial real estate (36.7%) to second place.
The declines were driven by state-owned enterprises pulling back on foreign investment. In 2018 13% of Chinese money came from state-owned enterprises, with 87% from private companies.
This reflects the Chinese government’s greater control of capital outflows and pressure to reduce debt levels, as well as the Australian government’s security concerns about Chinese influence.
It also reflects global dynamics. Chinese investment in Australia is no longer isolated from scrutiny of Chinese investment in North America and Europe. Excluding Chinese technology from telecommunications infrastructure is a notable example.
In the United States, Chinese investment fell 83% to US$4.8 billion from US$29 billion in 2017. In Canada, it fell 47% to US$3.4 billion from US$6.2 billion in 2017.
Balancing competing concerns
Australian governments, corporations and professional advisers need to consider what types of Chinese investments and investors are desired and actively welcome in Australia.
Our report points to areas where Chinese investment is in Australia’s national interest and benefits the global integration and competitiveness of Australian industries.
Health care is a key example.
Chinese investment in health care companies has both provided capital for innovation and facilitated entry into the Chinese market.
Take the Chinese private equity firm CDH buying Sirtex Medical Ltd for A$1.9 billion. Sirtex is an Australian medical device company with a treatment for liver cancer. Its acquisition enables expansion into China, which accounts for more half of the global incidence of liver cancer.
In mining, lithium provides an example of Chinese investment adding value. Tianqi Lithium has invested A$700 million in a processing plant in Perth. The plant will provide about 200 jobs and produce 48,000 tonnes of battery-grade lithium hydroxide for export.
Even in food and agriculture, which has generated much controversy over land acquisitions, we see room for advantageous investment processing and value-adding facilities, such as regional abattoirs.
Signalling Australia’s economic interests in Chinese and foreign investment is crucial to Australia’s prosperity.
At a time of global uncertainty, Australian politicians, bureaucrats, business leaders, educational organisations and others must work quietly and respectfully with their Chinese counterparts to allay community concerns and consolidate Australia’s reputation as a welcoming and proactive partner.
The authors contributed to the Demystifying Chinese Investment in Australia Report.
Despite recent falls in the housing market, housing costs and indebtedness bite deeply into household budgets, especially at Christmas time. Just over 433,000 households confront housing stress and homelessness every day across Australia. They represent the current shortfall of social housing.
If Christmas offers a moment for reflection, ask yourself what should our resolutions be for the housing market? What should we expect our governments to do about it?
In this article, we look at this week’s major statement on housing policy from a key contender to lead Australia’s next government – made by Bill Shorten at the ALP national conference.
We applaud the principle of fairness and the ambition of the ALP policy. We are less supportive of the reliance on for-profit investors, market rent mechanisms and land grabs. Our research shows direct government investment in social housing is ultimately far more efficient and effective than subsidising investors in the long term.
Shorten’s announcement also pledges reform of tax concessions that are driving inequality between households and investors. However, Labor recognises that this might not be enough to tilt the balance in favour of low-income households, and directing the savings from these changes into housing programs is a welcome move.
Labor proposes to subsidise investors in affordable rental housing, much like the Rudd government’s National Rental Affordability Scheme (NRAS). Labor would offer an $8,500-a-year subsidy over 15 years to investors who build new homes for low-income and middle-income households to rent at an “affordable” rate – 20% below market rent.
Starting modestly, the program aims to produce 20,000 affordable units over three years, building to a much larger target of 250,000 dwellings over ten years.
State governments would also be required to get on board through partnership agreements, as they have done in the past, providing land and other forms of co-investment. Hefty stamp duty revenues in recent years should make this easier for the states.
While Labor’s targets appear high by recent standards, Commonwealth and state governments directly funded the building of 9,000 public housing dwellings each year for the better half of the 20th century – until 1996. Annual production is now down to 3,000 dwellings. That’s not even enough to maintain the existing public share of housing.
Since the mid-1990s, a preference for outsourcing social responsibility through private rental providers and indirect rental support payments has dominated public policy. The ALP’s subsidy-based policy continues this trend.
The proposal centres on maintaining returns to investors at levels that encourage investment. As our previous research has shown, over the longer term this increases cost per dwelling. The question remains, as it did under the NRAS: who are we trying to subsidise here, the investors or the tenants, and is it really equitable and effective?
What are the alternatives?
Previous work has shown that NRAS-type schemes offer most benefit to new affordable housing developments when the funds are directed to not for profit organisations, rather than “leaking” out to the for-profit private sector. The advantages of this approach include:
subsidies are retained within the affordable housing system
benefits are directed to regulated not-for-profit developers with a social purpose
the benefit is stretched out over a longer time, meaning government investment does not expire after a set time.
In the UK, a lack of direct conditional investment and weak definitions of affordability led to an 80% decline in social housing production. Without public equity, recurrent operating subsidies have no influence on design quality or ongoing impact after the expiry of providers’ obligations – or their cancellation. Yes, they can be switched on and off like a tap – as happened in 2014 with the NRAS.
With good design, a new scheme could overcome some of these deficiencies. Labor promises to provide lower annual subsidies than NRAS but for longer – 15 rather than 10 years – adding up to at least $127,500 from the Commonwealth for a tenancy to be offered at below market rents. It’s a substantial commitment.
Yet if this level of support was invested up front to build dwellings, rather than provided as an annual operating subsidy, it would make a substantial and enduring contribution to Australia’s housing needs. This is not only socially responsible, it can drive green innovation and is also more financially responsible too.
The only thing that stands in the way is the narrow public accounting doctrine that privileges day-to-day expenditure over long-term investments. This is something that, in the UK, even the Treasury and the National Audit Office are learning to overcome after the painful experience of the Private Finance Initiative.
How much more cost-effective is direct investment?
If equity and fairness are to be the yardsticks of policy, age pensioners, people with disabilities and low-paid workers should be the focus of our deepest support. Our AHURI research has established the level, type and location of investment required to meet the needs of 433,000 low-income households in housing stress or homeless across Australia. The current market offers no affordable or secure options for them.
Our research also compared the cost of subsidising investors versus direct investment by government. Our modelling of costs and review of international experience provide evidence that direct investment is far more efficient and effective in the medium and long term.
Thus, we argue for more direct investment in social housing, strategic use of efficient mission-driven financing and retained investment via public equity and public land leases.
Recognition of the need for national leadership and policy reform is growing. After backpedalling, the Coalition government moved forward in 2018 to establish, with cross-party support, the National Housing Finance Corporation. This mission focused public corporation will soon channel lower-cost financing towards regulated not-for-profit housing. Of course, financing is debt and not quite the same as funding.
The Australian Greens have yet to announce their policy but an outline suggests a commitment to invest in social housing and establish a federal housing trust.
The ALP’s proposals are framed in line with the laudable principle of fairness and are a work in progress – rather than mission accomplished. Overcoming the shortfall of affordable and secure housing will require purposeful Commonwealth and state government funding, mission driven financing as well as land policies to make housing markets fairer for all.
The Morrison government’s decision to block Hong Kong’s largest infrastructure company from buying one of Australia’s key infrastructure companies seems to make a complicated relationship with China even more fraught.
Rejections of foreign takeover bids are extremely rare. This is just the sixth such decision in nearly two decades.
It might be argued the blocking of the A$13 billion bid for gas pipeline operator APA Group by Cheung Kong Infrastructure (CKI) Holdings reflects increasing politicisation of Australia’s process for reviewing foreign investment.
But this is not a political shot across the bows like China’s announced anti-dumping probe into imports of Australian barley. This takeover proposal was always doubtful. News of its knock-back potentially damaging relations with China, or foreign investment more generally, are greatly exaggerated.
APA Group owns 15,000 km of natural gas pipelines and supplies about half the gas used in Australia. It owns or has interests in gas storage facilities, gas-fired power stations, and wind and solar renewable energy generators.
The board is only an advisory body. The final decision rests with the federal treasurer. Josh Frydenberg signalled his intention to block the deal in early November, giving CKI a few weeks to change its proposal, either by selling assets or finding other investment partners, enough to change his mind.
That did not happen. Frydenberg’s final decision to block the bid was based, he said, on “a single foreign company group having sole ownership and control over Australia’s most significant gas transmission business”.
He emphasised the government remained committed to welcoming foreign investment: “foreign investment helps support jobs and rising living standards.”
It’s not all about CKI
CKI is not state-controlled. It is headed by the son of Hong Kong’s richest man, Li Ka-shing, and has a history of considerable success in investing in Australia.
Nonetheless speculation about the rejection damaging the Australia-China relationship has ensued. In the words of the South China Morning Post: “As the most China-dependent developed economy, Australia potentially has a lot to lose should relations with its biggest trading partner deteriorate further.”
First, there is broad bipartisan agreement that foreign investment is crucial to Australia’s economic prosperity.
Second, as already mentioned, this is just the sixth major public foreign investment proposal blocked since 2000. (All but one, notably, have been by Liberal treasurers.)
Third, all six rejections have been case-specific. Each bid has been considered on its merits.
This case arguably has less to with CKI being Chinese linked than with the size and significance of APA, whose transmission system includes three-quarters of the pipes in NSW and Victoria.
In 2016 CKI’s A$11 billion bid for NSW electricity distributor Ausgrid was also blocked (by then-treasurer Scott Morrison) on national security grounds.
But in 2017 CKI won approval for its A$7.4 billion bid for West Australian-focused electricity and gas distribution giant DUET. And in 2014 CKI’s acquisition of gas distributor Envestra (now Australian Gas Networks) was also cleared.
This is not to deny that politics played a part in Frydenberg’s decision.
The seven-person FIRB board was divided (the exact votes are not known). The Treasurer’s call could have gone either way.
Forces within the Liberal Party that opposed Malcolm Turnbull’s leadership have also been deeply hostile to APA’s sale to CKI. Among the most vociferous was NSW senator Jim Molan, who warned of “hidden dragons” in the deal.
For a minority government lagging in the polls and just months away from an election, such views have assumed inflated importance.
Nonetheless the APA decision was not a surprise. Greater scrutiny is now part and parcel of the Foreign Investment Review Board process. In particular, the emphasis has firmly shifted over the past few years to scrutinising national security and taxation areas.
The Critical Infrastructure Centre within the Department of Home Affairs, which became fully operational this year, brings together capability from across the federal government to manage national security risks from foreign involvement in Australia’s critical infrastructure. It’s particularly focused on telecommunications, electricity, gas, water and ports.
David Irvine, who has chaired the Foreign Investment Review Board since April 2017, is a former head of the Australian Security Intelligence Organisation.
This shifting emphasis does not equate to a bias against foreign investment per se. There is no evidence investors, including Chinese, are being discouraged or significantly deterred from investing in Australia.
CKI itself demonstrates, by returning to Australia despite previous rejections, that foreign investors will not give up so long as the next deal stacks up. There is already speculation CKI has moved on, and now has its eyes on Spark Infrastructure, an ASX-listed owner of energy asset.
If Scott Morrison was looking for a way to prove Australia is a good neighbour to Pacific nations, he could hardly have chosen a worse option.
Looking for a policy to combat both China and his domestic Opposition, the Australian prime minister last week announced a plan involving billions of dollars for Pacific nations.
Billions of dollars in loans, that is.
He promised A$2 billion for an Australian Infrastructure Financing Facility for the Pacific to invest in projects focusing on the telecommunications, energy, transport and water sector. And another A$1 billion to Efic, Australia’s government-backed Export Finance and Insurance Corporation, for concessional credit to Pacific projects.
The plan is driven in part by a desire to combat China’s economic diplomacy in the Pacific. There is concern that island nations will end up indebted to Chinese creditors.
So why would Morrison want to offer Pacific Island nations even more debt?
The AIFFP has rightly been called a response to Chinese development finance in the Pacific. This is mostly from the Chinese Development Bank, not the Asian Infrastructure Investment Bank (AIIB), which China initiated in 2013. Fiji, Samoa and Vanuatu are the only Pacific island nations that have so far joined the AIIB, and they have not received any loans. However, the Cook Islands, Papua New Guinea and Tonga have expressed an intent to join.
As with many initiatives, the devil is in the detail of the Australian response.
Morrison has already indicated there will be no increase in Australia’s already stingy aid budget. Given his criticism of multilateral organisations as “useless”, it seems likely the AIFFP’s A$2 billion will come from diverting contributions that would have gone to United Nations agencies or other programs for low-income countries not in the Pacific.
While a greater focus on the Pacific is welcome given the region’s needs, it should not come at the expense of other countries with equally pressing challenges. Further, the shift from grants to loans is not welcome news.
Apart from an interest-free loan to Indonesia following the 2004 Indian Ocean tsunami that killed about 170,000 Indonesians, Australian aid has long been fully grant-based. That has been one of its key strengths.
It has left debt-based development financing to the multilateral development banks it helps fund, in particular the World Bank, the Asian Development Bank and the new AIIB.
The World Bank and International Monetary Fund’s joint Development Committee warned about debt concerns for developing nations last month. Debt vulnerabilities risked “reversing the benefits of earlier debt relief initiatives”, it said in a communique from the annual meetings of its parent organisations held in Bali last month.
At the meetings, it was clear the IMF was more concerned about debt than the World Bank. Indeed the World Bank and its affiliates were successful in gaining a very large capital increase – US$13 billion in paid-in capital from member states, with the aim that it increase lending to US$100 billion a year by 2030.
The World Bank also had a large capital increase after the 2008 Global Financial Crisis, as did other development banks. These increases were not just in response to the crisis but also underpinned by concerns about competition from China and other emerging powers.
With the AIIB and the New Development Bank (established by Brazil, Russia, India, China and South Africa in 2015), there are now about 27 multilateral development banks.
Further, many countries have development finance institutions like Australia’s planned AIFFP, and export-import banks like Australia’s Efic. On top of that, private finance is at record highs.
The case for more debt-based development financing is just not there.
Of 13 Pacific island countries, six are already considered at high risk of debt distress. In a couple of cases is that due to Chinese finance. In other cases the multilateral development banks are the biggest creditors. Four other countries are at moderate risk of debt distress.
Adding to those debts is not a wise or decent thing for Australia to do. Even the government’s former minister for international development and the Pacific, Concetta Fierravanti-Wells, has warned about debt.
Most Pacific island communities have limited potential to develop along standard capitalist lines. Debt-based development requires projects with substantial economic rates of return and strong cash flows, which is difficult in small island states. Large hard infrastructure projects are risky, as Australia has learned in Vanuatu, and need to be climate change proofed.
The AIFFP reflects a new global mantra focused on replacing aid with lending money for infrastructure. It is not responding any demand from the Pacific. Core parts of the Sustainable Development Goals like health, education and climate sustainability are being ignored. It remains to be seen if anyone in the region embraces it.
Bill Shorten is flagging that Labor would set up a government-backed infrastructure investment bank to promote concessional financing for nation-building projects in the Pacific.
In a speech to the Lowy Institute on Monday – part of which has been released beforehand – Shorten says Australia’s Pacific neighbours want partners for infrastructure projects – “and as prime minister, I
intend to make sure they look to Australia first.
“I see this as a way Australia can elevate our status as a ‘partner-of-choice’ for Pacific development and enhance security and prosperity in the region,” he says.
In government, the ALP would put the Pacific “front and centre” in its regional foreign policy, Shorten says.
It would grow Australia’s aid commitment to the Pacific. But while development assistance is critical “our agenda for engagement needs to be bigger and broader than that”.
“We should be encouraging others, including private firms, to invest in projects that drive development in the region: from roads and ports to water supply, communications technology and energy infrastructure.
“New Zealand are already doing this, the United States and Japan are also exploring their options. Australia should be too.
“My vision is for Australia to actively facilitate concessional loans and financing for investment in these vital, nation-building projects through a government-backed infrastructure investment bank.”
Shorten does not spell out the detail of the proposed bank, which his office said would encompass projects in the wider Indo-Pacific region, but with its main emphasis on the Pacific. Planning appears to be in
its early stages.
In his speech Shorten, stressing the diversity of nations in the Pacific, says a Labor government would engage with these countries “through partnership, not paternalism”.
“We will listen, knowing that for our Pacific neighbours, sustainable development and poverty reduction are more than economic concerns. And
we must strive to understand the socio-cultural dimensions which impact these issues.”
Labor would upgrade the position of minister for Pacific affairs, which has recently been downgraded to an assistant minister. Labor’s minister would coordinate Pacific strategy and programs across
“We will engage with the Pacific not through the intricacies of geopolitics – but in its own right. Our goal will not be the strategic denial of others but rather the economic betterment of the ten million
people of the Pacific islands themselves,” Shorten says.
Criticising Scott Morrison’s decision not to attend the recent Pacific Islands Forum, which was held immediately after he became prime minister, Shorten says this was “part of a pattern of neglect of the
Forum by Coalition prime ministers”.
The opposition leader also argues that Labor is better able than the Coalition to chime in with the Pacific countries’ concerns about climate change.
“No community of nations are more concerned about climate change – with better reason – than our Pacific neighbours. Rising sea levels are an existential threat for these nations, ” he says.
“Under a Labor government, Australia will be much better placed to help our neighbours respond and to press their case internationally because we accept the science of climate change – and we accept the need for real action.”
Morrison repeatedly has given as one reason for resisting the push from the right for Australia to exit the Paris climate agreement that the climate issue is of major concern to Pacific countries which are in turn strategically important to Australia.
POSTSCRIPT: Government takes new hit in Newspoll: ALP leads 54-46%
The government and Prime Minister Scott Morrison have slipped in the latest Newspoll, published in Monday’s Australian.
Labor has widened its two-party lead to 54-46%, compared with 53-47% a
fortnight ago. On primary votes, the Coalition has dropped a point to
36%; Labor has gained a point to 39%. The Greens are down from 11% to
Morrison’s satisfaction rating has fallen 4 points to 41% while
dissatisfaction with his performance is up 6 points to 44%. This gives
him a net negative rating for the first time.
But he retains a healthy head over Bill Shorten as better prime
minister – 43-35%, although the gap has narrowed from 45-34%.
Satisfaction with Shorten is up 2 points to 37%; his dissatisfaction
rating is 50%, down a point.
The latest results come in the wake of the Liberals’ loss of Wentworth
to independent Kerryn Phelps, which has produced a hung parliament.
Previously Morrison had been clawing back from the government’s
disastrous deterioration in the poll after the removal of Malcolm
Turnbull, but that apparent small improvement has now been set back.
The poll found that 58% want the government to run full term rather
than call an early election.
Chinese infrastructure investment in Australia has rarely left the headlines lately. It’s reported that telecommunications giant Huawei will likely be banned from building Australia’s 5G network on national security grounds. Hong Kong-based company CK Infrastructure’s bid to buy APA Group’s gas pipeline network is also proving controversial.
Greater scrutiny of investment projects is welcome, especially if community and environmental concerns are also considered. However, Australia could benefit from the availability of Chinese infrastructure financing.
Given the state of relations with China and Australia’s pressing infrastructure needs, the Australian government must develop a clear strategy for Chinese infrastructure investment. Instead of passively scrutinising bids, the government should proactively identify worthwhile projects and engage Chinese counterparts to finance and implement them.
A proactive approach could benefit Australia because Chinese infrastructure investment is not as strategically directed as many assume. This is clear if we examine the Belt and Road Initiative (BRI) – the centrepiece of China’s global infrastructure financing spree.
President Xi Jinping has undoubtedly used the BRI to signal China’s rise to “great power” status. But its main drivers are domestic and commercial. At its core, the BRI is an effort to alleviate China’s industrial overcapacity problem in key sectors, such as steel, glass, cement and aluminium.
Overcapacity has worsened since the global financial crisis, as Beijing sought to maintain growth by encouraging an infrastructure construction boom. State-owned enterprises (SOEs) spearheaded this. After profitable domestic opportunities had dried up, international expansion became attractive, to keep SOEs working and to find more productive outlets for China’s huge foreign currency reserves.
The BRI’s implementation has reflected competition, lobbying and compromises among ministries, provinces and SOEs. Its masterplan document – “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road” – is a case in point. It contains 50 “priority areas”. These cover virtually every governmental and non-governmental activity, showing little actual prioritisation.
Early statements suggested a BRI focus on Central and Southeast Asia. But since 2015 the initiative has been formally opened to all countries. This was again due to intense lobbying from provinces, SOEs and some foreign governments. All are keen to get some of the action, suggesting little strategic direction.
The vague and loose Belt and Road plan has enabled considerable scope for interests within the Chinese party-state to use it for their own, economically motivated, agendas, with little consideration for Beijing’s wider diplomatic objectives. This has generated a rather chaotic, “bottom-up” process for selecting and funding projects.
Belt and Road project ideas usually emerge from state-owned enterprises’ in-country subsidiaries. After spotting an opportunity, they try to build support in the recipient government. Occasionally, this includes bribing officials. They also often seek to obtain the local Chinese embassy’s support to improve lobbying back home.
Once agreement with the recipient government is reached, the SOE or the recipient government applies for financing from China’s policy or commercial banks. The banks determine whether to extend credit after assessing repayment capacity. The central government’s involvement is typically limited to the National Development and Reform Commission’s formal approval.
Chinese infrastructure projects are not risk-free. The potential for misuse of key infrastructure to serve Chinese strategic agendas is clearly the Australian government’s foremost concern. But there are more immediate issues too.
Chinese banks’ lending standards are well below world “best practice”. They give limited consideration to social, environmental and labour protections when awarding financing to projects.
Tough competition between Chinese companies means they have strong incentives to cut corners and promote projects that recipients do not need. The latter can be saddled with unnecessary infrastructure and potentially unsustainable debt. Furthermore, Chinese central agencies’ capacity to regulate SOEs’ offshore activities is weak, so they cannot be relied upon to manage these problems.
Closer scrutiny of investment proposals is, therefore, clearly necessary. So, too, is tight regulation of project implementation. Australian regulators should also ensure Chinese projects adequately resolve social, environmental and labour concerns.
The fragmented nature of Chinese investments provides opportunities, however, for selective engagement that could serve the wider public interest. This should form part of a clear Australian strategy towards China based on a nuanced analysis of both the threats and opportunities of this multifaceted relationship.
One of the most striking features of the Queensland election campaign is that all major parties are advocating public investment in electricity generation.
The real choice to be made is whether this investment will promote the goal of a decarbonised energy system, or whether it will seek to delay this transition and prolong Australia’s reliance on coal-fired electricity.
Labor and the Greens are advocating public investment in renewables, while the LNP and One Nation want a new coal-fired power station.
This choice, in turn, depends on attitudes to mainstream climate science. If the findings of mainstream science are accepted, a complete phase-out of coal-fired power, and its replacement by renewables, must take place over the next couple of decades. This implies a target of 50% renewables by around 2030.
The Queensland Renewable Energy Expert Panel modelled the achievement of a 50% renewables share for Queensland. The Expert Panel identified economic benefits of a renewable investment program including an average gain of 6,400 jobs.
Queensland has retained publicly owned electricity generators, primarily focused on coal-fired power. It would make sense for the public to diversify more into renewables.
Where the parties stand
At its recent conference, Labor committed to continued public ownership in the electricity sector and a 50% renewables target by 2030. The conference motion proposed a publicly owned energy corporation committed to protecting customers’ interests and building at least 1000 MW of clean energy.
The Greens propose more comprehensive public ownership with investment of $15 billion over the next 5 years to build publicly-owned clean energy and storage, estimated to create 5,500 jobs every year. The Labor-Green emphasis on renewables is consistent with the movement of the global mainstream.
Last week, at the UN Climate Conference in Bonn, 19 nations including the UK, New Zealand and Canada joined the Powering Past Coal Alliance, pledged to phase out coal-fired power altogether.
In sharp contrast, One Nation’s policy is based on the claim that climate change is a hoax, promoted by the United Nations as part of its sinister Agenda 21 policy, which, according to the One Nation platform, seeks to control you and your life .
This position is, at least, internally consistent. The willingness of conservative, liberal and labour governments around the world to sign up to a common climate change policy is seen by One Nation as evidence that the UN is making progress towards its goal of world domination.
The LNP takes a more ambivalent position. While backing coal and opposing renewables, its Queensland state conference narrowly rejected a motion calling on Australia to withdraw from its Paris commitments to reduce greenhouse gas emissions.
‘HELE’ of a big gamble
The key idea used to reconcile these contradiction is the idea that we can meet our commitments using “high efficiency, low emissions” (HELE) coal-fired power stations.
HELE power stations rely on the process of ultra-supercritical generation. That sounds impressive, but the reality is more prosaic. The term supercritical refers to the fact that at high temperatures and pressures, fluids are neither liquids (in this case, water) nor gases (steam) but display characteristics of both. Supercritical boilers are 10-20% more efficient than subcritical boilers.
The first supercritical boiler was invented in the 1920s. The technology was fully commercialised by the 1990s. Coal-fired power stations built in Queensland since 2000 operate on supercritical technology.
‘Ultra-supercritical’ plants, first installed around 2000, operate at even higher temperatures and pressures, but the additional increase in efficiency is limited, by the physics of the Carnot cycle, to between 10 and 15 per cent. The HELE acronym is misleading: emissions are lower than those of 20th century plants, but higher than any other generation technology.
So, the moment any substantial carbon price is imposed the proposed power plant will cease to be financially viable and will become a stranded asset. Investment in such a project is a bet that all the world’s scientists and every other government in the developed world have got things wrong or, alternatively, that Australia can go it alone on this issue.
It’s hard to see any financial institution taking a risk like this. Given the warnings already issued by regulators about the dangers of investing in stranded assets, a loan that goes bad will leave the lender open to litigation and regulatory sanctions. Will banks be willing to lend the necessary billion dollars or so on such collateral.
Should the LNP gain office, then, their policy will face a critical test. Even with a substantial public investment, will any private firm be willing to take an equity stake in what looks certain to become a stranded asset? If not, will the Queensland public be forced to bear the entire risk?
About 40,000 more Pakistanis are leaving their homes in South Waziristan as Pakistan’s military prepares to launch a new offensive against the Taliban, Reuters reports. They join over 2 million other people who have fled the violence since May, reports MNN.
The Christian Reformed World Relief Committee is providing $500,000 of food aid for the refugees through the Canadian Foodgrains Bank. It will deliver 708 metric tons of lentils, oil, fortified wheat flour, sugar, iodized salt, and chili powder to internally displaced person (IDP) camps in the Swabi district of North West Frontier Province, Pakistan.
Two thousand families, or about 14,000 people, live in the camps. CRWRC will give first priority to widows with children and to families who have lost loved ones.
CRWRC received a testimonial from Muhammad Akber Khan.
“I am a senior citizen and the oldest person in my family,” he said. “The continuous shelling compelled us to leave our native town and home. We left everything back home as we were given only 20-25 minutes to leave the town. All that we could have carried were the clothes that we were wearing at the time of migration. We want to go back to our homes as soon as possible as our lifetime investment is there; moreover, we have to supervise our crops that were the only sources of our livelihood. I am grateful to the staff of I-LAP and CRWRC who shared their love and care through giving.”
CRWRC has already distributed mosquito nets, sleeping mats, and water containers in the camps. Its International Disaster Response team responds to natural and man-made disasters all over the world, bringing relief and aid to those who need it most. It works in cooperation with local and international nongovernmental organizations (NGOs) in order to respond quickly and effectively to the urgent needs of a community.