Another miner avoids its fair share.

According to an article in the SMH Australia’s largest coalminer, Glencore, paid almost zero tax over the past three years, despite income of $15 billion, as it radically reduced its tax exposure by taking large, unnecessarily expensive loans from its associates overseas. The aggressive tax avoidance tactics have been identified in an independent analysis of the company’s accounts for Fairfax Media by an expert in multinational financing.

Along with the blatant irregularities in its borrowing and lending, the study also found a hefty increase in Glencore’s coal sales to related companies indicative of transfer pricing, also known as profit-shifting, and an activity that appears to breach Section IVA of the Income Tax Assessment Act, the part that deals with schemes designed to comply technically with the law but whose ”dominant purpose” is really to avoid tax.

From: The Wall Street Journal May 03, 2013.

Ivan Glasenberg, the South African/Swiss/Australian citizen, left no doubt that the new Xstrata will retain all of Glencore’s hard-charging DNA. He explained why he sees no difference between politically volatile nations that might seize assets and stable democracies that raise taxes. Glasenberg said he expects to fire a “big amount” of Xstrata middle managers. Glasenberg declined to give a figure for the layoffs. “It’s going to be big,” he said. Glasenberg  owns 8 per cent of the new, combined company with a notional value of $92 billion, making his worth $7.6 billion and maintaining his second-place rank on Forbes list of Australia’s richest. With coal, copper, zinc and nickel operations in Australia and 40 other countries around the world, Glencore rivals the world’s two biggest miners, BHP Billiton and Rio Tinto.

Don’t know much about Glencore? Never heard of Marc Rich? Listen to the Hungry Beast.

The Hypocrisy of Australian Mining.

The Australia Institute produced a report titled “Seeing through the dust: Coal in the Hunter Valley economy”. As the summary points out, contrary to the claims of the mining industry, ceasing coal mining would probably be beneficial to the economy if externalities were taken into account.

The Hunter Valley produces and exports large volumes of coal. Supporters of the industry portray it as a “vital economic engine room” and “the bedrock of the Hunter’s economy”. In contrast to coal proponents claims, however, economic profiles of the region emphasise that the Hunter has a diversified, modern economy, without any one dominant sector, and that the service sectors are the major employers. The coal industry’s public statements invariably emphasise its apparent economic importance. Claims are usually made in absolute terms – tonnes of coal, numbers of jobs, total royalties paid and so on. But when the industry is placed in context we see that:
[1]  Only five per cent of Hunter Valley jobs are in the coal industry – in other words, 95 per cent of Hunter workers do not work in the coal industry.
[2]  Only two per cent of NSW government revenue comes from coal royalties – the other 98 per cent comes from other sources.

The coal industry’s regular economic claims give the public an inflated impression of its importance. To investigate the difference between public perception and the reality of the industry’s role in the Hunter economy, The Australia Institute conducted a survey of 1,001 Hunter residents. Key results indicate that:
 respondents think the coal industry employs four times more people than it does
 respondents think coal royalties are ten times more important than they are.
Strong majorities of respondents answered that the coal industry has a negative effect on the Hunter’s:
 air quality and health
 water and bushland
 other industries.
Even though survey respondents had a heavily inflated impression of the coal industry’s economic importance, only a minority – 37 per cent – felt that the industry’s economic contribution outweighed the other costs it imposed on the community. Eighty-three per cent of Hunter residents do not want to see the industry expand, while 41 per cent would like to see it decrease or be phased out.

A smaller coal industry would have only minor impacts on the future Hunter economy. According to economic modeling commissioned by Regional Development Australia – Hunter, long-term adverse conditions for the coal industry would have minimal effect on employment (zero to 1.2 per cent) and minor impacts on economic output (0.2 to four per cent). The people of the Hunter Valley – and NSW decision makers – should realise that an ever expanding coal industry is not essential to the economic future of the Hunter. Stopping the expansion of the Hunter coal industry and beginning to reduce its output levels will not cause widespread unemployment or problems for state finances – it would, in fact, be likely to improve air quality, health and environmental impacts and bring benefits for other industries.

Now, further research has attempted to put a dollar figure on the value of state government assistance to fossil fuel and mining companies across Australia.

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Rather than providing evidence that the research has produced inconsistent results a spokesman simply tried to play the man rather than the ball:

”Australia Institute reports about the mining sector are routinely riddled with errors, distortions and misstatements,” Minerals Council chief executive Brendan Pearson said. ”According to Deloitte Access Economics, over the last six years, the Australian mining sector contributed over $121 billion to federal and state governments in the form of corporate tax and royalty payments.”

As Ross Gittens in his SMH article points out, “Mining may account for 10 per cent of our total production, but it accounts for only about 2 per cent of total employment. Building new mines is labour intensive, but running them isn’t. If so, why bother? It’s a mistake to think it’s only direct employment of people that makes an industry worthwhile. What matters is how much income an industry generates. Why? Because when that income is spent it will generate jobs elsewhere in the economy. That’s what spending does: generate jobs.

In the case of mining, however, there’s a complication. Though the powers that be don’t trumpet the fact, mining is about 80 per cent foreign-owned. Even BHP Billiton is, essentially, a foreign company. And most of the extensive capital equipment mining uses is imported. If mining creates so few jobs directly, and so little of its profits accrue to Australians, that leaves two key concerns to ensure Australians get suitable recompense for the exploitation of our natural inheritance: make sure miners pay adequate royalties on the minerals we grant them and make sure their profits are adequately taxed.

The Labor government bungled its attempt to ensure the miners’ profits were adequately taxed. But, rather than correcting Labor’s errors, Tony Abbott has pledged to abolish the tax and let the foreign miners off the hook. Then he’ll wonder why the huge expansion in mining production we’re now seeing is creating so few jobs. It gets worse. Not only are we under-taxing the miners, we’re giving them lots of subsidies. Not only does the federal government give them a rebate on the excise on their diesel fuel, the state governments give them assistance by building the roads, railways and ports they need to ship their minerals abroad.”

Time for the public to see through the hypocrisy and bullshit and insist that Australian mining pays its fair share.

Lying by omission.

A study commissioned by the CEFC identifies how a cooperative approach to saving energy could cut billions of dollars from the nation’s electricity bills. Investing in Savings: Finance and Cooperative Approaches to Electricity Demand Management, a study by the Institute for Sustainable Futures of the University of Technology Sydney, has found that electricity network businesses could become the source of big energy savings for households and business. So why are the major energy suppliers determined to scuttle the price on carbon and have you ever wondered why our government is so quick to destroy clean energy initiatives? Why the great work of agencies such as ARENA is ignored? How the green sector rarely gets a look in when it comes to energy policy? One clue as to the source of this ‘slash-and-burn’ mentality may lie in the influence of a powerful think tank called the Institute of Public Affairs (IPA).

One look at their website shows the IPA to be bitterly opposed to any forms of support for the sector. Their publications and opinion pieces in newspapers follow the familiar anti-renewables message (download their submission to the Renewable Energy Target Review Panel here for a look). This isn’t surprising given their main funding source. While extremely secretive about the origin of their funds, the think tank has previously admitted receiving funds from companies such as Caltex and Esso, throw in support from Rupert Murdoch and Gina Rinehart and you have the main players behind the anti green energy stance.

The first thing you’ll notice is all the omissions. Not one word about fossil fuel subsidies? Any mention of the cost of externalities ? What about the cost to the environment of transport, [Abbot Point springs to mind]? If you add up all the subsidies to the mining industry it makes what is given to the Clean Energy Future a pittance by comparison.

But why does the IPA oppose renewable energy? Some of the answers are given in this blog.

 

 

ASFA’s White Paper consultation

Based on the results of submissions received from the general public, surveys and research conducted by ASFA, the consultation found Australians recognise that our system is world-leading, and therefore many do not have an appetite for major changes. Instead, minor improvements were suggested, particularly to help ensure the system remains sustainable into the future, and to accommodate the budget demands of an ageing population. While the vast majority of respondents favoured continued access to lump sums, imposing a tax on them, over a threshold, was one area of hot-topic debate, with 56 per cent of the online submissions to ASFA indicating they were in favour of access to lump sums, at the time of retirement being tax-free. Respondents were also in favour of the Government using various incentives to encourage people to save more for their retirement.

Interesting suggestions from the general public included:

• making it compulsory to include member projections of likely income-stream outcomes in retirement on superannuation statements,
• taxing accumulation and pension-phase earnings equally at 15 per cent, to ensure generational equity,
• providing tax and social services advantages to people who invest in lifetime pensions or deferred annuities,
• treating super lump sums as assets for the purpose of Centrelink for five years after they are taken, 
• taxing benefits as assessable income, noting this would still allow most individuals to take income tax free in retirement,
• restricting the amount of a lump sum withdrawal to the amount of non-concessional contributions made to a person’s superannuation account.

A number of broad and diverse views were also received from industry participants, particularly when considering the introduction of a lifetime caps on contributions, with some suggesting a rolling annual cap be implemented over a three to five year period. The issue of defaulting members into an income stream upon retirement was also raised with some submissions in favour of this, while others were firmly opposed, due to concerns with respect to consumer sovereignty and practicality of administration.

Read a description of the system here  and the complete report here. 

 

GHG Pollution.

Seventy years ago, when scientists first started to discuss the greenhouse effect they chose to use the carbon dioxide equivalent [CO_2e]. Had they chosen the methane equivalent CH_4e [23 times more absorbent] it is unlikely that we’d be having the arguments now confusing the debate over GHG pollution. Proponents of the climate change argument should stop using CO₂ in their communications and refer to the deleterious levels of GHG pollution just as they did when discussing ‘acid rain’ [SO₂ pollution] or ‘ozone depletion’ [CFC pollution].

What is needed is a peer reviewed publication that brings together information on the application of methods and techniques to estimate, measure, account and audit greenhouse pollution, with experiences on its management and control including implementing market-based instruments (such as the clean development mechanisms) to achieve emission reduction objectives at all levels providing a credible source of peer reviewed data and information that contributes towards the enhancement of the quality of greenhouse gas emission and removal inventory data and the broader application of successful greenhouse gas mitigation measures. http://ghginstitute.org/research/journal/

The next step is to promote the portfolio approach. GHG pollution arises from a number of different sectors and is not confined to CO₂. In order that meaningful reductions are made different approaches to solving the problem should be tried in parallel.

LPG Production.

Natural gas and petroleum systems are the largest source of CH₄ emissions from industry. Methane is the primary component of natural gas. Some CH₄ is emitted to the atmosphere during the production, processing, storage, transmission, and distribution of natural gas. Because gas is often found alongside petroleum, the production, refinement, transportation, and storage of crude oil is also a source of CH₄ emissions. This source of GHG pollution is particularly important to Darwin as two large LPG processing trains have been built since 2009 contributing a total of at least 13.5 Mtpa [Conoco Phillips 4 million tons/annum and INPEX 7.5 Mtpa] virtually doubling the total GHG pollution load in the NT.

Both companies have paid little more than lip service to their obligations under the EIS wherein they said that sequestration of significant proportions of GHG effluent produced by their plants would be completed by a variety of methods involving tree planting and the remainder offset. Conoco Philips has supported the pioneering WALFA project which offers great potential in reducing the effect of bushfires in the NT but only offsetting 100,000 tpa, less than 3% of its emissions.

The Federal Government has granted Major Project Facilitation (MPF) status to a WA project seeking to commercialize technology in which algae and waste CO2 from the production of LNG to produce biodiesel, protein-rich biomass for aquaculture and animal feed and omega-3 oils for human nutrition. The project uses a unique, energy-efficient harvesting method, applying technology commonly used in the waste-water treatment industry rather than using a traditional centrifuge approach.

The multinational companies could use this technology to significantly reduce their pollution levels, not incur any ETS penalties and simultaneously produce a variety of valuable by- products.

The biomass remaining after the oil has been extracted can be pelletized with at least two markets as food for the large numbers of live cattle that are exported though Darwin to Asia; feedstock for slow pyrolysis that co-produces electricity (eligible for certificates under the Renewable Energy Target)  and biochar, a soil supplement that sequesters carbon, eligible for additional carbon credits. Production costs will be reduced by as much as 60% because CO2, electricity and nutrients can all be supplied at little or no cost.

 

Transport

Transport fuel is the Achilles’ heel of the Australian economy. Amid abundant energy from coal, gas, wind, solar, hydro, geothermal and other sources the one thing we lack is liquid transport fuel. Currently, the nation imports 85 per cent of its transport fuels, either as crude oil or refined products. Reliance on imported fuels is growing as refineries close. According to a Kokoda Foundation/NRMA study we have just 23 days’ supply of fuel in the pipeline in the event of a crisis in the Middle East or Southeast Asia that disrupted delivery.

Unlike most advanced nations, we have no national fuel reserve, our policy being to ‘rely on the market’. In such an event food supplies would run out nationally in 7-10 days essential medical supplies and fuel for motorists within 3 days: “Essentially our society as we know it would cease to function,” the study warns. Furthermore Australia spends around $38-40 billion a year buying fuel from other countries – money which could otherwise be used to create new industries and regional jobs here and to build national infrastructure. While debate rages over ‘peak oil’, a fact that has generally escaped public notice is that world vehicle production is expanding by around 7 per cent a year, whereas global oil production from all sources, conventional and unconventional, is only growing by 0.7 per cent a year.

 This mismatch between future demand and supply of fossil oil poses inherent price and supply risks. While the risk of a global oil crisis disrupting our national fuel supplies is deemed by some as low , its potential impact on Australia is very high. Transport by road, air and sea wouldn’t quickly come to a halt, as there are no large-scale viable transport fuel alternatives available at short notice. While Australia is often characterised as ‘food secure  food delivery relies on 80,000 truck movements a week and food production is close to 100 per cent reliant on liquid fuels for farming and water pumping. An oil crisis may quickly become a food crisis.

A New Energy Source.

Fresh algal oil is liquid solar energy. The main product of algae culture is a crude oil which can be fractioned into the same kinds of fuels and chemical compounds as fossil petroleum. These microscopic plants produce over 100 times more oil than do land plants (such as canola, sunflowers or soybeans) because they do not have to divert energy to producing roots, stems, flowers, seeds and leaves. Yields of oil from different types of wild algae range from 28-77 per cent. Unlike our food crops, these algae have not yet been improved or specially bred for high production, so scope for future yield gains is large. Also, with 72,500 known algae species to choose from worldwide, scope for selecting the most productive and suitable types is also very large.

Oil is typically recovered by filtering the algae to remove the water, and then by cycloning them to extract the oil or else by using a combination of heat and pressure in processes such as hydrothermal liquefaction (HTL). This leaves a high-value residue of protein-rich material that can be made into human food or fed to farm livestock and fish, as it is high in naturally occurring omega-3s, vitamins and betacarotene, highly desirable in a healthy diet. It can also be used to manufacture fertilisers, chemicals, textiles, biodegradable plastics, paper and other industrial products. The protein content and oil can be used to make health foods and medical drugs. Processes for extracting fresh oil from algae are simpler, cleaner, safer, less polluting and potentially cheaper than extracting fossil oil from deep underground or beneath the ocean. Furthermore fresh algal oil is entirely renewable and, if well-designed, has little or no greenhouse impact.

Algae are generally grown in large ponds, tanks or raceways, or else by more intensive cultural methods (eg. photobioreactors) which offer higher yields per area of land. Australia’s entire transport liquid fuel needs – every car, truck, ship, plane and train – could be met from an area of 6,000 kms² of ponds, equivalent in size to a single large sheep station. Or if intensive methods were used, an area of 60,000 hectares, equal to about five big Western Australian grain farms.

Algae for a Better Life.

Any new form of energy is accompanied by vigorous debate over its environmental and social impact, and algae farming will be no different. However algal biofuels offer a number of benefits which alternative and traditional fuels do not:  Since the modern food chain depends on liquid fuels for production and transport, algal biofuels offer the (only) prospect of complete food security for Australia regardless of external shocks.

• They can potentially be produced in ways that yield few or no net greenhouse gas emissions, thus making a major contribution to national climate policy goals.
• They offer the prospect of tens of thousands of new jobs and enterprises in a decentralised industry that will regenerate regional and rural Australia, equivalent to a doubling in size of the farming economy.
• They offer a dependable, decentralised source of transport fuel for the Australian Defence Forces, emergency services, hospitals, remote communities, farms and other essential users that is proof against overseas crises and shortages, and most climate impacts.
• They can be used to clean up pollution in our water supplies, if so required – especially nutrient pollution likely to cause wild algal blooms and eutrophication of water bodies, but also heavy metals, pesticides and organic contaminants.
• They can be used to consume the waste-streams of polluting industries, such as CO2 emissions from coal-fired power stations or wastes from food processing, abattoirs, pulp and paper making, pulp mills etc.

While the footprint of an algal fuels industry sufficient to supply the whole market is large, it is no larger than mining overall and can be confined to areas of land or sea of low economic, social and environmental value – including abandoned surface mines. Its impact can also be diluted by having numerous small algae farms spread across the continent and its ocean zone, especially in desert regions, growing fuel close to where it is used, and making the national fuel supply proof against major climate impacts.

•  Algae can be used to make biodegradable polymers that break down naturally, to replace the current fossil oil-based plastics which are contaminating the planet and killing wildlife.
• They can be used to recycle urban organic waste, waste water and runoff.
• Algae offer a renewable source of organic fertiliser for farming, horticulture, forestry and revegetation.
• Half of the output of algae production can potentially be used as a high-value stockfeed, leading to a doubling in the size of Australia’s fish and livestock sector.
• They are a viable use for saline groundwater released by the dewatering of mines or by coal-seam gas production, which would otherwise go to waste, have undesirable environmental impacts or high disposal costs.
• Their by-products can be used as a replacement for wood in certain uses, including paper and cardboard, and as a green solid fuel replacing coke for fires, barbecues etc.
• There are many suitable algae species native to Australia which, unlike food crops, avoid the risk of adverse environmental impacts from foreign introductions.

 

Climate change and global warming – what’s the difference?

The meaning of ‘climate change’ is fairly straightforward, a clear, sustained change (over a long period) in the components of climate, such as temperature, precipitation, atmospheric pressure, or winds. Such changes must constitute a clear trend, and be clearly distinguished from the small random variation in these parameters that takes place all the time. That is why climate change can only be determined after careful analysis over centuries and millennia of observations. In this context, it is important to understand clearly the difference between climate and weather.

Weather and climate – horses of a different colour.

Weather is the specific condition of the atmosphere at any particular place at any moment in time. It is described in terms of such variables as temperature, cloudiness, sunshine, fog, frost, precipitation, humidity, atmospheric pressure and wind. In most places, weather can change from hour-to-hour, day-to-day, and season-to-season.

Climate is the average of the weather, and any patterns in the weather, for a particular region over a long time period, usually for at least 100 years. Weather is determined by factors that change rapidly; climate is determined by factors much slower to change, or that do not change at all. Typically, the main determinant of a region’s climate is its latitude, followed by factors such as elevation, proximity to the ocean, and the presence of ocean currents. A simple way of remembering the difference is that climate is what you expect (e.g. cold winters) and weather is what you get (e.g. a blizzard on a particular day). As climate is a long-term average of weather conditions, variations in it are much more slowly evident than changes in the weather, which can occur in timeframes of a few hours.

Climate change can refer to change in the global climate or in regional climates. A range of variables can cause slow changes to climates anywhere on earth. Many of these factors are natural, for example, slight changes in the luminosity of the sun, subtle shifts to the earth’s axis or orbit, or the gradual drifting of the continents over millions of years. The composition of the atmosphere is also a major factor affecting the climate over the whole world, because it can determine how much heat the earth retains through the greenhouse effect.

Climate may change in a single region or across the whole planet. Throughout earth’s history, climates have changed. Change can be brought about by a variety of means including natural external factors or natural internal processes such as volcanic activity; or, as has occurred since the Industrial Revolution, human-induced (anthropogenic) factors.

Global warming (which is not considered a technical term) refers to an increase in the average temperature at the surface of the earth, or the lower part of the atmosphere. The various components of the climate, oceans and atmosphere are inextricably linked through complex feedback mechanisms, and a change in one component such as temperature will induce changes and adjustments in other components.

Other changes that have either already been observed or are projected to occur include sea level rise; changes in rainfall patterns; increases in extreme weather events; decreases in ice mass of glaciers, ice sheets and sea ice; ocean warming and acidification; changes in ocean circulation; and drying of the land.

The major problem with measurement of change is lack of data. Measurements of weather over the last couple of hundred years are quite detailed however changes to climate need data from a dozen centuries and the analysis of ice cores from kilometres under the ice cap. Only when this data is analysed will the models used to predict change and its consequences be able to be tested for veracity.

The debate about terminology would be an interesting side note were not the issue so important. Global warming, or climate change if you prefer, is the greatest threat facing humankind this century. These seemingly innocuous phrases profoundly affect how people perceive the issues, assess the seriousness and support efforts to mitigate global warming. The complication is that although terminology is important, the manner and scale of influence is difficult to measure or understand. Yet, commentators and communicators often firmly come down on one side or the other, with staunch views about what works and what doesn’t.

A significant contributor to this is the illusion of asymmetric insight, a fascinating cognitive bias that helps explain why climate communication is so diabolically difficult. Asymmetric insight is a phenomenon where someone believes they understand the reasons why other people do or believe things, while at the same time being sceptical that others could ever understand them. People, especially commentators, believe that they see the world how it really is, whereas most other people (especially those people who disagree with them) are deluded, ignorant or self-interested. The bias of asymmetric insight means that people are less likely to see others who disagree with them in nuanced or complex ways; simple things can explain complex and multifaceted changes in opinion or actions.

Tying into the difficulty of climate communications is the fact that typically the people doing research into this field are heavily invested in the area. Climate communicators mostly care deeply about the dangers of runaway climate change. The result is that they often underestimate the extent to which most people are ambivalent or uninterested in the issue.

Because asking questions about peoples’ attitudes on an issue will generally prompt a response, the disinterest and ambivalence is hidden, and so it is easy to assume that most people have a latent interest or concern about global warming, when in fact they probably don’t. The ups and downs of climate polling in Australia for example appears to show an increase in the polarisation over the issue, but it is easy to over emphasise that when you’re asking the question compared to large swathes of the community where the issue may rarely or never come up.

 A study has found that as many people “use neither” (35 percent) as use the term “global warming” (35 percent) and more than double that use “climate change” (15 percent). This suggests that as a communications challenge, regardless of the term used, the biggest barrier is disinterest, not the specific language being used.

A lot of communications is done by heuristics, [heuristics are strategies using readily accessible, though loosely applicable, information to control problem solving in human beings and machines such as experience-based techniques for problem solving, learning, and discovery that give a solution which is not guaranteed to be optimal. Where the exhaustive search is impractical, heuristic methods are used to speed up the process of finding a satisfactory solution via mental shortcuts to ease the cognitive load of making a decision. Examples include using a rule of thumb, an educated guess, an intuitive judgment, stereotyping, or common sense] but even when hard numbers, in the form of polling, is brought to the equation, there is an enormous risk that judgemental shortcuts are used to interpret those numbers. Because we believe we can understand why people believe the things they do (while at the same time not believing that others could possibly understand us), it is easy to skew or ignore the results of research.

Just changing from one phrase to another without also shifting the context is unlikely to change attitudes. The challenge for climate communications is that we often think we are gaining valuable insights from research but more likely we are succumbing to the illusion of asymmetric insight.

Source: http://www.theguardian.com/environment/southern-crossroads/2014/jun/10/global-warming-climate-change-asymmetric-insight