How to end the carbon wars overnight

Via the AFR:

The centrepiece of Labor’s plan to reduce carbon emissions – a baseline and credit scheme for the nation’s top 250 emitters – appears doomed with the Coalition opposed to the entire policy and the Greens hostile towards several elements, including letting companies offset emissions by buying international carbon permits.

If Labor wins the federal election, expected to be called within days, it would need the support of either the Coalition or the Greens to secure the passage of legislation in the Senate.

Labor leader Bill Shorten, right, with the party’s energy and climate spokesman Mark Butler. announce Labor’s new emissions policy.

But in what looms as a repeat of 2009 when Kevin Rudd’s Carbon Pollution Reduction Scheme crashed, Labor has unveiled a climate change policy that is considered too soft by the Greens and too severe by the Coalition.

Except that none of this necessary. The entire carbon wars edifice is bullshit; a political artifice created to debate something we never planned on, never needed, and could still end overnight. The entire renewables versus coal structure is a false binary.

How can that be so? Easy. Like everybody else, we always planned our carbon transition to use gas as the “bridging fuel” as coal disappeared and renewables caught down in price. All that went wrong with this plan is that a few nasty individuals seized and sold Australia’s largest terrestrial gas reserves in QLD to Asia when nobody was looking.

Not only that, they built huge, loss making LNG plants to do it. To make up those losses, they depleted and gouged the local market. The gas price went from $3Gj to $20Gj. And because gas stills sets the marginal cost of electricity, that caused power prices to rocket 200% as well.

That is what birthed the carbon wars. The rising price of utilities. Nothing else.

So, what is the answer? Again, easy. Apply domestic reservation to the gas cartel and force down the gas and power price. Problem solved overnight.

To see this in action we need only look to the home of freewheeling capitalism in the US. It is also building masses of LNG export plants, with approvals approaching double that of Australia:

But because it has taken the the time to approve the projects and pace them with rising reserves, the domestic price has cratered from pre-GFC China panic prices:

So much so that today some landlocked gas can’t be given away, via the FT:

In west Texas last week, you could not give gas away, as prices dropped to record lows. Companies trying to offload natural gas at the Waha hub, in the booming shale oil region of the Permian Basin, found they had to pay operators with pipeline capacity to take it away. The gas price at Waha registered a low last Thursday of minus $2.50 per million British Thermal Units and closed at minus $1.95, its lowest level since S&P Global Platts started collecting the data back in 1994.

But, I hear you say, the US has the shale boom, we do not. True! But we did have the unconventional gas boom as well, only via coal seam gas in QLD. And in our case the proportional expansion in reserves was LARGER than it was in the US.

Thankfully all of that US gas is coming to Asia in due course to ensure the regional price remains low:

But that doesn’t help Australians. Because unlike the home of freewheeling global capitalism we never did gas reservation. When we did do it later in a panic it was done badly. So as the price of US gas turns negative and Asian gas crashes to USD4.50, Aussie gas is today still hovering near $11Gj, ripping the guts out of the east cast economy in a $20bn theft the likes of which I have never seen in the most tin pot banana republic anywhere.

So, should we import this US gas too? So long as the Asian price is low it would crush the local cartel. It’s an option. Today that would give us a gas price of $6-7Gj versus the cartel gouge of $10-11. But it would also embed the import price plus the cost of regasification for end users, guaranteeing a competitive disadvantage despite our own cheap reserves. As well, the US gas would probably never even get here. Instead, Australia’s own gas would sail out of QLD then come south to ports in NSW and VIC, with a pack of middle men clipping the ticket along the way. It also means if the Asian gas price goes up or the AUD falls then local prices go straight up again.

We’re better off copying the US example and stiffening our own domestic reservation policy that just ensures the cheapest Aussie reserves stay here. Today that would give us a gas price of $4-5Gj if export net-back prices are enforced. Wholesale electricity prices will also crash by 60% because gas sets the marginal cost of power too. We should add a gas price ceiling to the domestic reservation regime as well, at $6Gj no matter what the Asian gas price does. The gas cartel produces plenty of gas cheaper than that. We should keep it. If they built loss making LNG plants then that’s their problem.

That would save east coast households and businesses $15-20bn per annum. Yeh, that’s $15-20 BILLION, 1% of GDP pissed into the pocket of a blood sucking gas cartel.

And it would end the carbon wars overnight.

David Llewellyn-Smith


      • Gas is indeed “better” than coal – however according to Harvard the life cycle is about 76% – we need to be zero by 2030 – not 76%.

        Perhaps putting down the Agenda and picking up the Argus might help.


        Its renewables or the death of humanity – no ifs, no buts, no maybes – 12 years is the timeline we have been given.

        It is so disheartening that so many people simply can not put down their own personal crusades (you breaking the gas cartel) but instead willingly sacrifice humanity on the alter of their own solipsism and ego.

        No gas is a total f#king disaster – a catastrophe.

      • We;re not going to be at zero by 2030. I’m trying get us there as quickly as possible.

        To be honest, if you really gave a shit you’d be pushing nuclear.

      • “Gas is indeed “better” than coal – however according to Harvard the life cycle is about 76% – we need to be zero by 2030 – not 76%.”

        But it is not 76% for 100% of the time. You ONLY turn on the gas pumps when ‘the wind is not blowing and the sun is not shining” – less than 5% of the time with a well connected and managed grid (until batteries get cheaper).

      • There’s a trailer up on YouTube for a drama based on Chernobyl. Once that is released nuclear power’s reputation is going to to plummet even further.

        Added to that is the waste disposal question. I was chatting to some folks from Geoscience Australia about this and they didn’t think burying it in central Australia was a good idea. Australia is on the most stable continental plate yet pressure still builds up. The biggest geophysical events are in the centre of Australia.

        When you add in our lack of expertise and long run in time nuclear only seems to be an option when a safer method is developed.

  1. You can’t do reservation – what about “Sovereign Risk”?

    you know, the thing that might make domestic and global corporations rethink lying to Australians in order to rip us off because there could be consequences?

    • truthisfashionable

      A good leader would have been able to reframe it so that the sovereign risk is not implementing gas reservation.

      Sadly we seem to be lacking in good leadership and have been for longer than I have been on this Earth.

  2. HnH. Not doubting your analysis here, but if it’s that easy, what do you think are the reasons they are not doing it?

    Probably difficult to really know, but interested to hear if you have any thoughts.

    • Game. Of. Mates.
      For our corrupt pollies and regulators:
      – Job offers
      – Directorships
      – Share parcels into tax haven trust companies
      – Asset purchases – held by beneficiary trusts
      – Louis Vuitton bags full of USD
      – Offshore land and buildings (with and without rental streams)

      And all of it out of sight of pecuniary interest registers

    • Corruption, dude. The person who makes the decision is eyeing off a paycheque from the sector when they leave parliament. Simple innit

    • LachlanMEMBER

      There is absolutely no political will to end the carbon wars. There are coal mining marginal LNP electorates to shore up. And coal mining dependant donors to appease.

      • DodgydamoMEMBER

        I have been hoping this may be the case… the silence is deafening… but having had Gillard rolled by similar vested interests shutting up is understandable. BTW thanks for continuing to publish the logical argument for smashing the gas cartel.

      • Interesting.. let’s hope so.

        Just to understand your thoughts a little more, when you say “they don’t want the fight”, do you mean the political fight (i.e. with the Coalition), or with the gas cartel?

        I would have thought the political argument would be a good one in terms of the election as the main opposition from the Coalition against Labor’s energy policies is ‘consumer prices going up’, and ‘justify the cost’.

        This could be an easy answer to the public for Labor, and I’m not sure how the Coalition would argue against it.

      • bolstroodMEMBER

        2 reasons Labor won’t do it
        Bill shortens Chief of staff’s partner , and Butler’s wife both work as big wigs in Fossil fuel industry.

  3. It a better transition than coal so we just need the public to know this. The the surplus was due to coal exports the ABC said this morning. Nothing we do really fixes anything if we keep exporting coal for power that China needs for the hundreds of CFPS it’s building. How hard is it to change a CFPS to a LNGFPS? Is there any corporate or political will to do this as all the CFPS here end of life and for some that is soon?

    How long before the LNG price crashes and the US will supply all our LNG needs? I was told that would happen eventually about four years ago.

  4. Hnh when are you going to recognise the flaws in your plan or at least explain yourself fully? What do you propose once pipelines shipping gas to from Qld to NSW/Vic are at capacity? New pipelines? Allow onshore drilling? Bass straight is only declining from here and you’re only telling half the story. No mention of break even costs either.

  5. See? Freewheeling capitalism is superior.

    And I sense freewheeling capitalism will embrace nuclear, too.

  6. HadronCollision


    “Tax cuts for the proles”
    “Because coal exports”
    “Your tax cuts (proles) are because coal”
    “Now, bend the knee (to coal)”

  7. I love your passion for this but in the end
    You can’t ever unscrew the Pooch
    Not much worth saying after that

  8. ErmingtonPlumbingMEMBER

    Fk the Gas Cartel and Fk sovereign risk!,… let’s just seize and Nationalise all of our Gas resources and distribution infrastructure.
    Lets have a Referendum and Put it to the Australian people, who have been getting it in the @rse for long enough by these greedy Pr!cks.

  9. USA did not allow oil to be exported till recently.

    The fake Greens need to cancel the 12 diesel submarines and instead build a UHVDC transmission line from WA to NSW.

    That will be good for gas power stations, solar power stations, and – should it be built – a nuclear power station.

    The 12 diesel submarines are a make work project. You can have another make work project instead.

    The transmission losses are only 3.5% per 1000 km with 800 kV DC.

    • bolstroodMEMBER

      What you token on Jacob ?
      For your information the Greens are not in Government.
      Hold 1seat in the House of Reps and 8 in the Senate.
      Address your compalaints to the LNP who made the Sub deal and from your constant blame of the Greens for government decisions appear to pay your salary.

      I think you are a an LNP shill

      • So it is ok for you to rant against the ALP (above at 12:42 pm) but if I rant against the fake Greens, I am paid by the LNP?

        I say “Scummo” and I am paid by the LNP?

        I have always hated the LNP and have zero expectations from them. The fake Greens increased the petrol tax in 2014:

        But some say the fake Greens are saints who have no political power at all.