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Thank you Jonathan for the opportunity to speak at this very important symposium.
It is indeed a privilege to be speaking at the same event as James Hansen, and of course all the other speakers.
The title of this talk is Lignite and Climate Change: The High Cost of Low Grade Coal.
It’s the title of my last report to Parliament.
I am going to spend some time putting this report into a historical perspective.
But I will begin by saying a few words about my role because it’s important to know where I am coming from.
Like the Auditor-General and the Ombudsmen I am what is known as an Officer of Parliament.
This means that while I am a public servant, I do not work for the Government, but for Parliament as a whole, and am not bound to follow the policies of any party.
This means that I am politically independent.
In my role I provide advice to MPs through investigations that result in written reports.
And through other mechanisms such as submissions to select committees.
A report will generally contain recommendations to specific Ministers, and
I aim to make those recommendations well reasoned and pragmatic.
I have no power beyond the ability to persuade and it is up to the Government of the day as to whether or not those recommendations are taken up.
My lignite report was tabled in Parliament last December, before being released publically.
We have copies here if you’d like to pick one up.
That report was the outcome of an investigation into the potential large scale conversion of lignite – poor quality coal – into a variety of products.
And what the greenhouse gas consequences of that path of action would be.
My interest in lignite goes back through much of my working life.
So I am going to spend a little time explaining this in the context of the last 30 or 40 years.
Because when you get to my age – and I hasten to add that I’ve a way to go before I’m on the pension…
When you get to my age, the historical context becomes very important for putting things into perspective.
Let me take you back to the 1970s.
To the formation of OPEC, the oil price shocks, the energy crisis, the first talk about renewable energy and non-renewable energy.
I don’t recall the phrase “peak oil” kicking around then – we spoke of Hubbert’s pimple.
The blip in geological time when the fossil fuels are burned.
My first degree was in physics.
Physics is of course, fundamentally about matter and energy - and I got this idea that maybe I could make a career in energy.
So off I went to the University of California at Berkeley to do a masters degree in energy and worked at Laurence Berkeley Laboratory on the economics of increasing the efficiency with which we use energy.
At the time we were pioneers.
People almost always thought about finding a way through the energy crisis – as it was called - by increasing the supply of energy in order to meet the rising demand for it.
We turned this on its head – you would not need supply to increase if you could get demand to fall.
And you can get demand for energy to fall by using it more efficiently.
Supplying energy through greater efficiency.
It’s a very familiar concept now but it was radical then.
Of course, the lignite plans are very much about increasing supply – very old school.
Fast forward a few years to the big new kid on the block – climate change.
I first learned about climate change when I was at Berkeley in the late 70s from Professor John Holdren, who is now President Obama’s science advisor.
At that time climate change had not made any inroads into public consciousness or into public policy.
I remember John saying he expected the environmental impacts that accompanied energy use to be more of a problem than limits on those resources.
And that to me is the nub of the problem with lignite.
We make petrol, diesel, plastics and so on out of oil.
The good oil – such as the most sought after light sweet crude -- is becoming scarce.
And no new giant oilfields are being discovered.
We can also make petrol, diesel, plastics out of poor quality fossil fuels like lignite.
And the world is not short of lignite.
Indeed no one is worrying about peak lignite.
Or peaks in other low quality fossil fuels such as tar sands and oil shale.
So to me, the term “peak oil” misses the point somewhat.
As we slide down the far side of the oil peak, subsititutes will kick in.
And if those substitutes are lignite, tar sands and oil shale, then we are in big trouble.
It’s not peak oil that worries me.
It’s the carbon footprints of the substitutes for oil that worry me.
The oil price shocks of the 70s led to self-sufficiency energy policies in many countries.
And New Zealand was no exception.
At least some of you will remember the carless days in 1979.
At around the same time the Liquid Fuels Trust Board was created here and charged with figuring out how we could be self-sufficient in liquid fuels, meaning, really, transport fuels.
The Board had a lot of money and funded a great range of research projects.
At one stage I did a small project for them.
It really was a different time then.
I recall hammering out a report on my Olivetti typewriter.
And women working on energy issues were a scarcity.
In the end the Liquid Fuels Trust Board came down to Maui gas in the interim –
and that meant the Motunui Synthetic Petrol Plant and other Think Big projects in Taranaki
Maui gas in the interim.
And then in the long run -- lignite.
The Board spent a lot of money on characterising the lignite reserves in Southland and Otago.
It’s that expenditure of public money in the 80s that has provided critical information for large scale development of lignite now.
It was in 1990, 20 years ago I wrote a report titled Transport fuels after Maui – lignite on the back burner.
Lignite is not on the back burner now – there are plans to – speaking figuratively -- burn huge amounts of it on the front burner and in so doing release huge amounts of carbon dioxide.
And so the plans for using lignite on a very large scale were hatched during a time when only a few scientists were concerned about climate change.
We’ve already had James Hansen talking earlier in the day, who is, of course, much more qualified to speak about climate change than I am.
But over the time that I’ve been interested in it, I see two trends.
First -- the predictions have become increasingly gloomy.
Second -- the consensus has become stronger and stronger.
Personally I would much rather not believe in climate change.
I can never quite understand this idea that people somehow get their kicks out of believing in it for some strange environmental doomsday reasons.
I have this picture in my mind of a lignite train.
It started running as I said when only a few scientists were concerned about climate change.
And it continues to run as if this still were the case.
There is no sign of it being derailed.
Lignite – or brown coal as it is called in most countries -- of course is a very poor quality form of coal.
I’ve actually heard it described as having the energy content of cow dung.
You could call it young immature coal or old petrified wood.
Here’s a bit I picked up down a hole in Southland.
Courtesy of Solid Energy, thank you Don.
As many of you will know, the core of this report is a set of carbon footprint calculations.
For diesel, for urea (nitrogen fertiliser), and for briquettes made out of lignite.
The basis for these calculations and the results are in my report.
And the details are available in an appendix on our website.
The way in which we have done these calculations is very conservative – likely too conservative.
I didn’t want anyone – Solid Energy or anyone else - coming out and saying we had exaggerated.
And I am pleased that Solid Energy at least has publicly accepted the results of the calculations.
I am particularly concerned about diesel – about the carbon intensity of diesel made from lignite.
Our state owned enterprise Solid Energy is not the only player here of course but was early off the blocks.
There is L & M Mining.
L & M originally stood for Lime & Marble – so the L is for lime not lignite.
There are other interested parties – for instance
Greywolf Goldmining – an Australian company acting for a large Chinese group.
So my conclusions are not directed at any one company.
I’m now going to talk briefly about New Zealand’s international commitments on climate change.
We are now almost at the end of the first commitment period for the Kyoto Protocol.
New Zealand is expected to be in the black, as it were, not the red, because a lot of forest was planted in the 1990s.
At Copenhagen, we made a commitment about greenhouse gases for the year 2020.
We are on track to miss that commitment by a country mile.
Those forests planted in the 1990s that are seeing us meet our Kyoto commitment at the end of next year will be harvested by 2020.
In 2020 we will be in the red.
Our commitment at Copenhagen was 10% to 20% below 1990 emissions.
Instead of 10 to 20% below, we are expected to be 30% above 1990.
That’s a gap of about 27 million tonnes of CO2 equivalent a year.
And that is without large scale development of lignite.
Bear with me while I repeat that – it’s so important.
This huge gap between what we have promised and what we are on track to achieve is without large scale development of lignite.
The lignite to diesel plant planned by Solid Energy would increase the size of that gap by 20%.
The lignite to diesel plant that L & M Mining has spoken of would add another 30%.
That’s a 50% increase in the gap.
Yes – we can buy carbon credits offshore to make up the difference.
But being so dependent on carbon reductions in other countries is a poor look for a country that brands itself internationally as clean and green.
And yes – the Copenhagen promise is only “politically binding” – and is contingent on what other countries do.
This of course is the great problem we are all faced with – a problem of collective action – I will if you will.
Beyond 2020 New Zealand has recently set a target of 50 by 50
– 50% less than 1990 emissions by 2050.
But we have no plan to get there – indeed the lignite developments take us into a high carbon future, not a low carbon future.
The Emissions Trading Scheme isn’t going to do it alone – certainly not in its current form with free allocation of far too many carbon credits.
With taxpayers, small businesses, consumers and foresters subsidising carbon-intensive industry.
By subsidising, I mean paying much of the carbon cost for them.
The first session this afternoon was on carbon capture and storage.
I really really hope that the world can get carbon capture and storage to work.
To not be hopelessly costly.
And for the CO2 to stay put and not leak.
But where are the reservoirs in the south of the country?
Southland is not Taranaki.
The only commercially proven process for converting diesel to lignite is the Fischer-Tropsch process.
I understand there are others under development but they are not there yet.
Will they get there?
And how much better would they really be?
Fischer-Tropsch was developed in Germany in the 1920s – that’s 80 to 90 years ago.
So looking at the timing of plans to develop and process lignite, it seems to me that we have a 1920s technology for making carbon dioxide.
And with luck a 2020s or 2030s technology for getting rid of it.
It’s also possible, of course, to plant a whole lot of trees to suck up carbon dioxide.
But that would be a forest that would have to get larger and larger as more carbon dioxide was emitted.
A continually expanding permanent forest.
Solid Energy press releases have spoken about taking “full responsibility” for carbon emissions.
I applaud the sentiment but am puzzled as to what this actually means.
At a minimum it could be simply complying with the regulations in the Emissions Trading Scheme.
Or it could be refusing to accept any free carbon credits.
Or it could be sequestering all the carbon dioxide emissions associated with these projects.
I cannot see that it can be anything other than complying with the law.
Surely going further than your competitors would put you at a disadvantage.
I would be pleased to be corrected on this.
L&M have been silent on what they would do – to the best of my knowledge.
I have also seen claims in the media that producing diesel and urea from lignite will mean lower prices for New Zealanders.
Cheaper diesel and cheaper fertiliser.
I find this odd.
Diesel, urea and briquettes are all commodities that are traded internationally.
And that means trading at world prices.
Of course, things produced here might be a little cheaper because transport costs are lower.
I said “might be”.
We produce huge amounts of cheese here.
But it’s not cheap.
Isn’t the cheese we send to Australia cheaper there than it is here?
Then there is the jobs argument.
Southland has the highest employment in the country.
We need to bring people from other countries to milk the cows down there.
And then there is the energy security argument.
I’m not really sure what this means either.
There is energy security in the short term – stockpiling enough fuel to get us through glitches in supply.
But longer term surely it can only mean self-sufficiency.
Or at least a fair measure of self-sufficiency.
This may well be a good thing but it is completely out of step with current policy.
Indeed New Zealand has not had policies of this kind for a very long time.
Since the reforms of the 80s and 90s we are very much an open economy.
If these policy settings are to change this should be done deliberately and democratically – with real discussion about what it means, rather than just letting it happen by default through granting of mineral permits and non-notified resource consents.
At the end of my report I make three recommendations – two about the Emissions Trading Scheme and one about green growth.
I wanted to draw attention to the ETS because it is entirely possible under current rules that taxpayers could end up paying some of the carbon costs of lignite projects.
Entirely possible that taxpayers would subsidise a high carbon future for this country.
Do I think full carbon pricing would stop these lignite projects?
Probably not because I expect the price of oil to rise faster than the price of carbon.
I was pleased to see the recent OECD report on New Zealand stating that energy policy may still work at cross-purposes with Kyoto objectives.
Citing my report, the chapter on Green growth and climate change policies went on to say “A case in point is the proposed development of two lignite plants….”
I look at a world where the population continues to grow fast.
It is already 77% bigger than it was when the first oil price shock hit.
The aspirations of people in developing world countries follow those of the developed world.
So demand for transport fuels will continue to grow.
It will not stop when oil production peaks.
The world is not short of lignite.
We are not unique in having lots of it.
If the world turns to making transport fuels out of low quality fossil fuels like lignite, then it seems to me that the party may well be over.
This, above all else is the issue that keeps me awake at night.