Transcript Economics = maximisation of human welfare

Towards a Sustainable Energy Future
for Australia
Prof Paul E Hardisty
August 2008
The Direction
1. Economic Context
2. Demand Management
3. Efficiency – making the best of what we have
4. New Technology
5. Don’t make things worse as we adapt
Actual oil prices since 1980
120
100
$ per barrel
80
60
40
20
0
1975
1980
1985
2% projection of reduction
in oil price from 1988
1990
1995
2000
5% projection of increase
in oil price from 1988
2005
2010
Actual oil price
True Sustainability is Economic

Financial analysis VS Economic analysis

Economics = maximisation of human welfare
 Include external costs and benefits
 Economic = Sustainable

REC 1: Market forces will find optimum
solutions with proper price signals / level
playing field
Save this much CO2
at no cost overall
Cheaper to Act Now than Later
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Source: EPRI, 2005
Solar Parabolic Trough
Nevada Solar One - 64MW
Anthropogenic Feedback Loops
OLD SOLUTION
Burn Coal
CLIMATE
CHANGE
Desalination
Drought
OUR
RESPONSE
Anthropogenic Feedback Loop
OLD SOLUTION
Burn Fossil
Fuels
CLIMATE
CHANGE
Air Conditioning
Rising
Temperatures
OUR
RESPONSE
Anthropogenic Feedback Loop
Cement, steel,
vehicles, land
clearing
Burn Fossil
Fuels
CLIMATE
CHANGE
Infrastructure
projects
Rising Sea
Levels
OUR
RESPONSE
A Sustainable Energy Future





True level playing field allows market to optimise as it
should
Achieved by examining full financial and economic
costs and benefits of each option
Global change, not just climate change
Demand and supply responses
Mix of energy sources likely required for optimality





Conventional high efficiency
Coal with carbon elimination
Mix of Renewables
Nuclear
Maximisation of human welfare is the sustainable goal
Recommendations
1. Economics – provide the market with price signal
2. Demand Management – use less energy
3. Efficiency – making the best of what we have
4. New Technology – a mix of options will do the trick
5. Don’t make things worse as we adapt
THANK YOU
delivering profitable sustainability
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