Professor Ross Garnaut launching the report.

18 June 2014 — The influential Committee for Economic Development of Australia has made a powerful case for Australia to respond to climate change, with risks of inaction including increased extreme weather costs and reduction in access to foreign capital for major projects. But among its recommendations, outlined in a report launched by Professor Ross Garnaut on Wednesday, is a controversial call for nuclear power to be considered.

The economic risks of climate change

The report, The Economics of Climate Change, examines the economic impacts climate change will inflict upon Australia, while analysing other countries’ responses and detailing effective mitigation and adaptation action Australia could take.

CEDA chief executive Professor Stephen Martin said climate change was both an environmental and economic issue, a position contrary to Prime Minister Tony Abbott’s statement that climate change should not be a focus of the upcoming G20 meeting in Brisbane because economic issues should be prioritised.

“The undeniable fact is that Australia’s economy will be critically exposed on two significant economic fronts if we do not ensure an appropriate response to climate change,” Professor Martin said.

“The first area that leaves our economy exposed if we don’t take action relates to the consequences of increasing extreme weather events and the economic and social impact that these events have on Australia’s production capacity.

Events like Cyclone Yasi, Black Saturday and the Queensland Floods had had a direct impact on industry and everyday Australians through taxes used to fund drought relief packages through to the Queensland flood recovery levy, Professor Martin said.

“While most Australians are happy to help others in need during or following these events, if there are options to reduce impacts before they happen then we should be looking at them now.”

Professor Martin used Roma, Queensland, as a place where early adaptation measures could have saved millions.

If a levee to protect the town had been built in 2005, it would have cost $20 million. However, since 2008 $100 million has been paid out in insurance claims and since 2005 a repair bill of over $500 million has been incurred by the public and private sectors,” he said.

“Statistics show that the number of catastrophic weather events is increasing and the economic losses associated with these events are also trending up, which is why we need a national approach to address these risks.”

He said Australia needed a framework for assessing climate risks and considering possible actions that may lower those risks, and recommended setting up a national risk register.

Foreign capital may not be interested in funding Australian projects

The availability of capital to fund infrastructure and other critical needs was at risk from climate change too, Professor Martin said.

“Australia is reliant on foreign capital to fund major projects, and new developments in international climate change policy are likely to impact international capital flow and investment decision making,” he said.

“Applying climate-related risk assessments when considering investment and financing decisions is an emerging trend globally. This trend is likely to have consequences for nationally significant industries in Australia, such as the resources sector, and associated asset values.”

He said Australia businesses and governments needed to ensure they were in step with the global community, and have options available to move to less carbon intensive industries, to remain competitive.

A “rethink” on emissions trading may be required, Professor Martin said.

More money needed to be invested in research and development to drive technological breakthroughs, Professor Martin said, which could be undertaken through a direct action policy, though this was unlikely to be enough to keep up with economies like the US and China.

Is nuclear an option?

Controversially, the report strongly supports a nuclear option. It stated that regulatory regimes needed to be set up for all energy sources, though was particularly strong on its support for nuclear energy, for which it said Australia needed to establish a “social licence to operate”.

“Removing a viable option from the portfolio available to Australia is not in the nation’s interest,” the report stated. “CEDA’s research has indicated that while nuclear power may not be commercially viable for Australia at this point, technological innovations that are being explored, particularly small modular reactors, have the potential to change that significantly.

“While rejecting nuclear energy may eliminate an extreme form of risk, that can be kept to a very low probability of occurrence, for example the risk of a significant radiation leak, the decision means achieving less mitigation and so accepting a lower probability of avoiding extreme climate change.”

The CEDA report calls for a regulatory framework around the technology and the development of relevant domestic skills.

The organisation’s stance is unsurprising, as it has long supported putting nuclear on the table, as can be seen in its 2012 report Australia’s Energy Options: Renewables and efficiency.

Why nuclear may not be a good option for Australia

However, there are many environmentalists and economists that question the necessity and viability of nuclear power in the Australian context – with issues ranging from the environmental impacts of mining through to a lack of skill base, timeframes of implementation, costs of construction and operation, insurability, public health, water consumption, waste disposal and security concerns.

National nuclear campaigner for Friends of the Earth and member of the EnergyScience Coalition Dr Jim Green told The Fifth Estate that Australia was unsuitable for nuclear power, and there were many unresolved problems with the technology.

A main point, he said, was that Australia could decarbonise without nuclear, and there were a range of viable clean energy scenarios that relied on renewables and energy efficiency to provide 100 per cent of Australia’s energy mix, including one published last year from the Australian Energy Market Operator.

Nuclear was also unsuited for Australia due to its water intensity, Dr Green said, with nuclear power being the most water intensive of all energy generation technology, consuming between 35-65 million litres of water each day – roughly 50 per cent more than coal, adding costs and further impacting a water-constrained country that climate change could make more dry.

He said the cost of building nuclear had more than doubled over the last decade, mainly due to increased safety requirements following the Fukushima disaster. New reactors recently built in Finland had started with cost estimates of €3 billion but had blown out to €8.5 billion – close to triple the original.

In the US there were five reactors being built, however a greater number were being closed or scheduled for decommissioning.

“Nuclear is going backwards in US, entirely because of the economics,” Dr Green said. “If we look globally the nuclear renaissance is pretty much stone cold dead.”

For Australia, an industry starting from scratch would also lead to additional costs – nuclear expertise would have to be imported, greenfield sites developed and regulatory infrastructure created.

And with Australia struggling to find places to put its small amount of low-level nuclear waste, and the Northern Land Council withdrawing its nomination of Muckaty Station as the site of Australia’s first nuclear waste dump, Dr Green said adding power generation waste would be unwise.

The long-lasting nature of nuclear waste also posed an issue of intergenerational equity, effectively passing on the costs of nuclear power to future generations, who would have to handle storage and safety of waste. There was also a risk of weapons proliferation through the byproduct of plutonium, or the enriched uranium feedstock that could be used for bombs.

Professor Stephen Lincoln from the University of Adelaide told The Fifth Estate nuclear power had advantages for Australia, including reducing carbon intensity and the fact Australia was relatively stable geologically, which was good news for operation and waste storage.

However, he said while nuclear could provide interim energy as we transitioned to renewables, our traditional centralised energy system might not be around for too much longer, particularly with the development of extremely efficient battery technology on the horizon.

“Centralised energy production might not be so necessary in future,” Professor Lincoln said. “A household might not need a power company at all.”

Read the full CEDA report here.