On identity, complexity and a ‘little’ fossil fuel project off the West Australian coast

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By David Salt

Earlier this month I spotted a tweet that chilled my soul while neatly summing up the challenge of sustainability for our age.

Here it is:

In a nutshell it shows the CEO of a major fossil fuel company extolling the virtues of a massive new project, the Scarborough development, with a comment from one of the world’s top coral scientists describing it as ‘a crime against humanity’ (while asking the responsible politicians to respond appropriately).

One single development

We’ve discussed aspects of the Scarborough development (the biggest oil and gas development to be built in Australia in a decade, situated off the coast of Western Australia) a few times on Sustainability Bites (see Lies, damned lies and environmental economics). It’s worth repeating that an analysis by the company Climate Analytics found that the total emissions from the proposed Scarborough project will be just under 1.4 billion tonnes, three times Australia’s annual emissions! Think about that. Climate Analytics is under no illusion and points out this single project undermines the Paris Agreement (of which Australia is a signatory).

The Australian Conservation Foundation has calculated these emissions will result in 0.000394 degrees of additional global warming that will, among other things, accelerate the decline of the Great Barrier Reef (which may partly account for the coral scientist’s dismay at Woodside’s promotional tweet).

Is an extra 4 x 10,000ths of a degree significant? Keep in mind this is a single development which, by itself, has the capacity to create a measurable global temperature increase at a time when the world is already overheating. This summer has seen unprecedented droughts, storms, fires and floods across Asia, Europe and North America. At this time no-one has even attempted to calculate the economic impact of the carnage from this northern summer, let alone tally the lives lost. And this situation only promises to get worse as carbon emissions increase.

A boon for the economy

Despite the accelerating impacts from climate change being felt all around the world, Woodside’s CEO tells us (though more likely she’s really wanting her shareholders and politicians to hear this) that Scarborough will “deliver value for Woodside shareholders and significant long-term benefits locally and nationally, including thousands of jobs, taxation revenue and supply of gas to export and domestic markets for decades to come.”

I cynical paraphrase might read: “let this project proceed and shareholders will be richly rewarded by quarterly rises in share price; while the enabling government can claim ‘jobs, jobs, jobs’, regional development and a secure supply of energy well into the future (and definitely beyond your next election).”

The planet? Well, it may endure a little more heating but focus on the profits.

And humanity? Bits of it will do very nicely, thank you very much, from the increased economic activity. And those that don’t? Well, most of them don’t vote in Australia and they definitely aren’t shareholders in Woodside, so there’s nothing to worry about here.

In any event, the planet and humanity are not the focus of the CEO’s missive to the masses; she’s more worried about quarterly returns to shareholders.

The standard model

The standard explanation for this situation goes something like this: some people put the economy before all else and believe the ‘climate alarmists’ are overstating the problem. These people might even acknowledge the climate is becoming increasingly problematic but are confident that as the crisis grows we’ll make more of an effort to fix it, and science and technology will save us. These people think that radical action to reduce carbon emissions will cause deep and unjustifiable pain to the economy and everyone’s standard of living.

The other side (which includes most scientists) believe humanity is changing the Earth System in deep and unpleasant ways that will hurt everyone. We need to do something now. Enabling new fossil fuel developments is mad; some describe them as ‘crimes again humanity’.

Both sides think the other side is crazy, and many have stopped listening to anything coming out of the other side.

You might have your own variant on this ‘standard model’ of the sustainability challenge but I believe most people subscribe to some version of it: two sides/tribes, two sets of values/priorities, situation gets worse, both sides blame the other and after a while everyone stops listening to anyone outside of their own tribe. It’s simple and neat – my side right, your side wrong.

A more complex model

Now here’s a more nuanced explanation that uses a bit of complexity (resilience) theory. Each of the players/actors/groups in this situation are complex systems, and each has its own identity emerging from the structure, function and feedbacks that make up that system. Understanding the feedbacks is important to understanding the behaviours of these systems.

The politicians are very responsive to voter’s needs and the level of support received from party supporters (including lobbyists and political donations).

The fossil fuel companies are very responsive to changes to the quarterly returns on investment and shareholder sentiment.

The scientists are very responsive to changes in biophysical indicators of the many components that make up the Earth System, the respect of their peers and the papers they can publish.

And the voters just want to be able to pay their bills, have a little certainty in what tomorrow brings, and maybe have the occasional holiday.

These are interacting complex systems and expecting them to behave in simple rational ways doesn’t necessarily help us resolve the differences that emerge between them over time.

Pointing out that the other side is wrong may work well with your own tribe but it usually does nothing to change the behaviour of the other side.

However, understanding what’s central to the identity of the other side and working on the feedbacks that shore up that identity is much more likely to produce change.

If voters don’t believe the future is safe, if shareholders no longer trust their shares will yield dividends in the longer term, if politicians are only allowed to make fully accountable and transparent decisions, then the very identity of their systems change, as does its behaviour. Of course, changing these feedbacks is never easy.

Another thing about complex systems

Another thing about complex systems that’s very relevant to this discussion. They are non-linear. That means you can’t always predict how they’ll change based on how they have changed in the past. Sometimes big disturbances can hit your system and yet it can absorb them and its identity remains intact (the system is ‘resilient’). Other times, it will only take a small disturbance and the system’s identity collapses (unexpectedly and often quickly, does anyone remember the Soviet Empire?).

The Earth System itself is a good example of this non-linearity. The group of scientists who first proposed the idea of ‘planetary boundaries’ (Rockstrom et al, 2009) pointed out that the Earth System itself is a complex system that has considerable capacity to absorb disturbances (changing atmospheric concentrations, declining biodiversity etc) and still retain its identity. For the past 10,000 years, that identity has been one of a relatively stable climate that has enabled the rise of civilisation.

But this capacity to continually absorb disturbance has limits, sometimes referred to as thresholds. They proposed a set of planetary boundaries (possible thresholds) beyond which the stability of the Earth System could well be lost. They proposed nine planetary boundaries, most of which we have now transgressed.

In some ways, the scientists suggest, the complexity of the Earth System has lulled us into a false sense of security. All the change we’ve imposed on it (most of it in the last half century), has been absorbed by the Earth System and it continues to function in a way conducive for humanity. But, having crossed these planetary boundaries, we have exhausted the planet’s capacity to absorb further disturbance. Many now believe further incremental disturbance may change things drastically. Indeed, we may even be seeing this with the savage summer of 2022.

Which all serves to underscore how complex the challenge of sustainability can be. We are all complex units operating in complex groups within a complex Earth System. ‘Simply’ pointing out why the opposite side is wrong may score points with our side but does little to fix the problem. For that to happen we need a deeper engagement with the complexity in which we find ourselves, more reflection on what gives us (our tribe and our planet) our identity, and a greater respect for the things that impact on that identity.

Banner image: Civilisation rose during an epoch of climate stability. Now that stability is possibly breaking down. So far, our response to this possibility has been simplistic and ineffective. Maybe it’s time to acknowledge the problem is complex. (Image by Reimund Bertrams from Pixabay)

Lies, damned lies and … Environmental Economics?

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A single LNG development in Australia could raise the global temperature by a tiny amount. Should it be allowed? What has the ‘economics of substitution’ got to do with it?

By Peter Burnett

People frustrated by weak government responses to the Paris Agreement (with its goal of limiting global warming to ‘well below’ 2° Celsius and ‘pursuing efforts’ to achieve 1.5°’), continue to look for ways to pressure governments for stronger action. One strategy is to challenge fossil fuel developments in court.

In the latest Australian challenge, the Australian Conservation Foundation (ACF) is challenging the federal approval given to Woodside Energy’s $16 billion Scarborough liquefied natural gas (LNG) project, off the Pilbara coast in Western Australia.

The formal basis for the challenge is, in essence, that Woodside obtained approval from the wrong federal regulator. Beyond that, it gets complicated. But it’s worth considering the details here because there are some very important principles at play.

Offshore Approvals and the Reef ‘carve-out’

Under Australia’s national environmental law, the Environment Protection and Biodiversity Conservation Act (EPBC Act) the federal environment minister would normally need to approve major developments such as Scarborough. However, in 2014, then environment minister Greg Hunt switched off this requirement for offshore projects by, in effect, accrediting the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) to approve projects in his stead.

The basis for NOPSEMA’s accreditation is that its regulatory regime was assessed as meeting the requirements of the EPBC Act. But the accreditation had several ‘carve-outs’, including for projects likely to have a significant impact on the Great Barrier Reef (GBR). In other words, if a major offshore project was likely to have an impact on the GBR, then NOPSEMA could not approve it and the task but would revert to the minister for the environment.

ACF’s claim is that even though Scarborough is off WA, its total greenhouse gas emissions, especially the ‘scope 3’ emissions generated when the gas is burnt by overseas customers, will be so large that as to have a significant impact on the GBR, even though it lies on the other side of the country.

If the ACF win the case, this would trigger the carve-out and bounce the project back to Australia’s new environment minister Tanya Plibersek for a fresh approval process, something that could take years (which could well scuttle the proposal).

Overheating

An analysis by Climate Analytics found that the total emissions from the Scarborough project were just under 1.4 billion tonnes, three times Australia’s annual emissions. ACF argues that this will result in 0.000394 degrees of additional global warming that will harm the Reef.

Woodside may counter that this is not a significant impact, even on the back of existing emissions-driven climate change.

Is an extra 4 x 10,000ths of a degree significant? I think there is a good argument that when the GBR is already at a critical point, every additional measurable impact on the whole reef is significant. Keep in mind this is a single development which, by itself, has the capacity to create a measurable global temperature increase (at a time when the world is already overheating).

A second likely defence argument will be that 1.4 billion tonnes is a gross figure, which would be offset significantly, if not completely, by various factors, including that gas from Scarborough, relatively low in carbon intensity, will displace other fossil fuels with significantly higher carbon intensity. This is the ‘market substitution’ argument.

We have been here before. In 2015, environment minister Greg Hunt used a similar argument in successfully defeating ACF’s challenge to Adani’s huge Carmichael coal mine in Queensland. The Federal Court upheld the minister’s decision at both first instance and on appeal.

So, if this argument has failed before, why run it again?

Will the market substitution argument prevail?

The basic argument may be the same, but the legal context is different, notwithstanding that both cases concern the application of the EPBC Act. In the Carmichael case, the relevant arguments revolved around the meaning of certain words in the Act, including ‘relevant impact’.

However, the appeal judges did say that their decision was made on the basis of the particular arguments which ACF had put; they dropped a hint that a different argument might have led to a different result. With so much at stake, this alone is enough to make one think it was worth having another go at the market substitution argument.

I don’t know what arguments ACF and their lawyers have in mind this time around, but the Scarborough case turns on some different legislative words, especially on what is a ‘significant’ impact, as distinct from the meaning of ‘impact’ itself.

In this slightly changed context, I think the economic substitution argument could be attacked from a different angle to the one used in Carmichael. It goes like this:

If the total emissions from the Scarborough project, including scope 3 emissions, are ‘likely to have a significant impact’ on the GBR, the current approval from NOPSEMA is invalid and Woodside must refer the project afresh to Minister Plibersek.

Notwithstanding that significance must be decided on the basis of a likely net, rather than gross emission increase; the likelihood is that each of the factors said to offset the gross impact does not, on balance, reduce the gross figure significantly, for the following reasons.

Even if gas from Scarborough has a much lower carbon content than the fuel currently consumed by Scarborough’s customers, it is not enough to find that this low carbon gas would displace high carbon fuel for these customers. Rather, to achieve a net reduction, the high carbon fuel must be displaced from the entire market — ie, it must be likely that it will be left in the ground.

This is because, prima facie, if supplies of a fossil fuel are displaced by an alternative, basic economics (the principle that markets ‘clear’) suggests that the displaced fuel will be sold elsewhere, even if this requires a price reduction. This is especially true given that the global market for fossil fuels continues to grow, despite a Covid19-induced dip.

Then there is the policy argument, that because many countries have adopted Paris targets such as ‘net zero by 2050’, emissions from Scarborough will be offset by reductions that are driven by these targets.

Even if countries delivered on such targets in full and the 1.5° goal were achieved, the reef would still be under significant threat and Scarborough would still exacerbate that threat.

However, countries are not on a global trajectory for anything like 1.5°, so the backdrop to Scarborough’s impact is closer to a 3° increase. Worse, many countries have a history of promising more than they deliver, in some cases adopting targets that are little more than aspirations.

Finally, there is the argument that technological change will drive major emissions reduction through the shift to renewables. This is valid in some countries, but, globally, the renewables shift is more than offset by global increases in demand: otherwise, global emissions would not continue to rise.

At the end of the day, unless there is evidence that gas from Scarborough is leading directly to high-carbon fuels being left in the ground, the supposed offsets look rather vague at best, leaving it likely that Scarborough’s net emissions will be similar to its gross emissions.

Where are we headed with this?

I wouldn’t like to predict where the Federal Court will land, but I do think it is possible that the market substitution argument, at least under the EPBC Act, will prove to make little difference.*

If I were the federal government I would deal with cases like this by moving quickly to legislate a comprehensive climate policy regime, not to mention a wider and contemporary environment protection regime as recommended by the 2020 Samuel Review.

I would be thinking that it is better for governments to get on the front foot rather than risk the unpredictable results that can follow when people are driven to litigation by their frustration with outdated or missing laws.

*I know the argument has been rejected by the Land and Environment Court in NSW in the Gloucester Resources case (Rocky Hill). But the Court there had the power to review the decision on the merits, which makes a big difference, for reasons too complicated to explain here.

Banner image: New research shows global warming of 1.5°C relative to pre-industrial levels will be catastrophic for almost all coral reefs – including those once thought of as refuges. Should any new fossil fuel developments be approved in such a time? (Image by Maria Beger)