Put Capitalism on trial at the COP26 Climate Conference

Written by: Study group contribution on October 2021

Part Two will follow after the COP26 Conference

The global warming crisis is confronting capitalism/imperialism with enormous difficulties in moving from fossil fuel sources of energy to clean, renewable sources of energy. There are just too many competing political and corporate interests to guarantee the transition is fast enough to achieve a significant reduction in global emissions, and this poses a grave threat to humanity.

The movement to renewable energy requires a massive injection in fixed capital in the form of new technologies and means of production. However, this will result in a relative decrease in the labour required to operate and maintain these new developments and an overall decrease in the unit cost of energy production. Competition within capitalism drives companies to achieve this outcome either through more productive, cheaper labour sources or new, more efficient technologies. In the case of moving to renewable energy, there are two positive outcomes in the longer term for the energy companies; cheaper costs associated with the production of energy and an increase in revenues at the expense of the rate of profit. This is already happening in a number of countries, including Sweden, Germany, Norway and Nicaragua.

Investment in renewable energy is consistent with the tendency within capitalism to adopt new technologies that provide a more efficient, relatively cheaper means of production. However, this is only a tendency and can be countered by a number of factors and it is necessary to understand some of these when addressing the issue of replacing non-renewable energy with renewable resources in Australia.

The adoption of new technologies has been analysed in depth in Marx’s Volume 3 of Capital. In Part III, Chapter XIII, “The Law of the Tendency of the Rate of Profit to Fall”, he points out how the introduction of more efficient means of production through technological innovation causes a relative increase in fixed capital relative to variable capital (labour power) and this results in a relative decrease in the rate of profit. “The immediate result of this is that the rate of surplus-value, at the same, or even rising degree of labour exploitation, is represented by a continually falling general rate of profit.”

In relation to energy there are at least two competing factors within capitalism. The first is that energy is a cost to all industries, and while it is a cost to the energy industries, it is also the primary source of revenue. The second is that the energy industries are some of the largest companies in the world and exert extensive control internationally. The energy industries have significant investment in the production of non-renewable energy resources and any movement to replacing these will be constrained by the need to maximise the opportunities to realise profit on existing investments. From their point of view, the interests of the country are a very secondary consideration. They will attempt to make the people pay for any transition that does occur.

This brake on moving forward with renewable energy resources is further constrained within countries like Australia because of their particular economic nature and corresponding historical alliance with industries associated with the extraction and export of raw materials. The investment by the energy industries is very significant in Australia as is the extensive influence and control of the owners of the energy industries. A particularly glaring example of the willingness of Australian politicians to collude with these industries at any cost is the LNG export arrangements and taxes.

In an article in the Age by Melissa Clarke (9-Sep-2021 – “Resource sector lobbies hardest on climate change, while net zero backers 'disengaged'”), it is pointed out that a report by a UK-based think tank that maintains a global database of corporate and industry lobbying efforts on climate change found that: “Corporate support for government action on climate change is muted in Australia, with the most intense lobbying coming from resources and energy companies calling for more limited change. Corporations that back reaching net zero emissions by 2050 as well as other policies that broadly support the Paris Agreement do little or negligible lobbying to encourage federal and state governments to take stronger action on climate change.”

The lack of strategic thinking and subservience by politicians to these largely, American owned companies reflect the nature of Australian capitalism and our dependence on the extraction and export of raw materials. Clinton Fernandes (ARENA Quarterly, Sept 2021) argues that Australia is characterised as an economic growth rather than an economic development country. This simply means we are focussed on a limited number of exports and if economic development involves ‘only such changes in economic life as are not forced upon it from without but arise by its own initiative, from within’, then Australia’s is not well placed to initiate substantial change. In terms of economic complexity which relates to the level of diversification (manufacturing and number of products to export), Australia is an anomaly amongst advanced economies with the lowest level of all the OECD countries and in 2017 was ranked fifty-ninth in the world for economic complexity.

Further in his ARENA article Fernandes states that “Australia’s …. Critical Minerals Strategy isn’t concerned with nation-building or increasing economic complexity but with creating a benign environment for private investors to carve up our critical minerals”.

The role of the capitalist state

Currently in Australia there are a number of coal-fired power stations. Most were built by the various state governments using taxpayers’ money to provide reliable electricity for the manufacturing boom after World War Two. An important function of the capitalist state is to provide infrastructure, services and investment capital beyond the resources of individual capitalists. These power stations were sold off to corporate ownership during the wave of privatisations that swept Australia over the last two decades. Now they are owned and operated by corporations such as Origin Energy, Alinta, Energy Australia and others.

Similarly, the previously state-owned distribution grids of sub-stations and transmission wires were also privatised to different corporations, and so too the retail sectors servicing the customers.

Even though the generation, distribution and retail of electricity is owned by many separate companies, they are mutually dependent and combine to form a powerful bloc of interests. Collectively, they occupy a monopoly position in capitalist Australia, though having the appearance of competitors in the retail market. In particular, they use any and every excuse to “pass on costs to the consumer”.

The state governments continue to provide services to these powerful corporations in the form of access to land, tax concessions, and subsidies for new equipment and technology. The capitalist state organisation ensures the profitability of these corporations, giving them privileged access to government in acknowledgement of their leverage and the implied threat of “blackouts” and “loss of jobs”.

UN Climate Change Conference (COP26) in Glasgow (November 1-12)

The looming threat of devastating climate warming in excess of 2°C will be the focus of world attention at this international conference. Limiting warming to 1.5C will require a much faster rate of retiring fossil fuels than currently projected.

Various countries, and especially the industrialised countries, will be expected to detail what progress they have made in reducing greenhouse gas emissions and what initiatives they have taken to introduce and support renewable technologies, and what efforts have been made to clean up and restore the natural environment as fossil fuels production phases out.

Political leaders seeking media attention will focus on what commitments they are prepared to make into the future, for example, net zero emissions by 2050, or 50% reduction by 2030. China has already signalled to meet net zero by 2060, but this may change when the conference meets. Undoubtedly there will be some positive movement and commitments made by many countries at this conference. Several factors are influencing the positions taken by governments around the world with many realising that some progress has to be made on this critical issue.

• Firstly, there is the massive wave of popular struggle and demands by people across the world, but especially young people concerned at the future humanity is facing.

• Secondly, there is the growing evidence of unstable, extreme climate events which are not only devastating livelihoods, but are also threatening established industries and corporate profits.

• Thirdly, there is an increasing investment risk for companies, banks, insurers, superannuation funds and shareholders to invest in fossil fuels which may become “stranded assets” in a relatively short time.

• Fourthly, there is the rapid expansion of renewable technologies and the growing attractiveness for investments in solar, wind, hydrogen, geothermal and batteries, with new opportunities to realise profits in emerging markets.

Morrison’s hot air

Prime Minister Morrison will travel to Glasgow immediately after the G20 meeting in Rome. The Australian government has a well-earned reputation as an apologist for the fossil fuel monopolies, led by a shallow individual whose promises and commitments mean little. In a government flush with climate change deniers and protectors of the coal and gas giants, Morrison waffles on about “modern farming technologies” and “avoided land clearing” and funding “carbon capture and storage”, but has not been able to demonstrate any practical pathway to significantly reduce emissions in Australia.

Under pressure from his AUKUS mates Biden and Johnson, Morrison has made some conditional commitment to meet a net zero by 2050 target to keep in step, but his credibility has been torpedoed.

In any case, as Greg Jericho points out in an article in the Guardian, “To stay within our 1.5C carbon budget, we need to get on a path to net zero by 2035 from now, not 2030” https://www.theguardian.com/commentisfree/2021/sep/28/net-zero-is-not-the-real-issue-we-need-to-focus-on-our-carbon-budget

Nor will Morrison make any commitment to cease the export of coal and gas to developing countries which adds to extreme weather events, dangerous levels of air pollution and the rising sea levels which threaten many island states and low-lying communities. The disastrous consequences of increasing global greenhouse gas emissions will inevitably lead to more mass migrations and regional conflicts.

The future of Coal

Apart from the emissions target, another key issue for the COP26 conference will be the future of coal, the most polluting and damaging of the fossil fuels. Leaders of countries will be under pressure to set closure deadlines on the mining, export and use of coal in power stations.

Immediate pressure will come from demonstrations of people from across the world demanding an end to the global coal industry, as well as many rallies, public meetings and actions in Glasgow prior to and during the conference. Further pressure will come from scientists and delegates to the conference who have studied the facts and reflect the concerns of the mass populations already experiencing changing and extreme weather patterns.

According to an article published in Nature, much of the world’s reserves of coal will have to remain untouched if a target of 1.5C is to be achieved by 2050. Globally that means 89 percent of reserves or 826 billion tonnes. For Australia, it translates to 95 percent of coal reserves or 80 billion tonnes. Nearly 60 percent of oil and gas reserves would also have to be left in the ground to limit global warming to 1.5C.

https://www.abc.net.au/news/science/2021-09-09/climate-change-global-warming-coal-gas-oil-extraction-emissions/100438206

Given the weight of evidence for urgent action on limiting greenhouse gas emissions, the political/environmental demands of global populations and the risk to profits, it clearly means that thermal coal production in Australia is on borrowed time.

Companies such as BHP and AGL are re-structuring to protect their investments and winding back their involvement in coal production. AGL will close down its Liddell power station in NSW next year and may bring forward the projected dates for Bayswater in NSW (2035) and Loy Yang A in Victoria (2048). Energy Australia will close down Yallourn power station in Victoria 4 years early in 2028.

While coal is used to generate up to 70 percent of the power for east coast Australia, this could be replaced within a few years by large scale battery farms fed from wind and solar and other renewable technologies. This has been the experience in South Australia where 60 percent is currently supplied by renewables.

Thermal coal is becoming increasingly unviable as an investment. Coal-fired power stations in Australia will shut down sooner than current company projections as profits disappear in the face of competition by renewables. The export market for thermal coal will also contract as other countries step up their transition to other renewable sources for electricity generation.

Coking coal exports for steel making will continue to be Australia’s major contribution to (global) emissions in other countries. However, the days of selling iron ore and importing it back as steel may also be under threat. There are plans by Fortescue Mining to develop a “green steel” manufacturing industry using hydrogen made from renewables, doing away with the need for coking coal and its export overseas, and perhaps providing jobs for displaced mine workers.

The Morrison government will continue to underwrite the coal industry in Australia using every trick to frustrate and delay the final years. Federal Energy Minister Angus Taylor has been sprouting a “capacity mechanism” which would provide rapid energy generation when “the sun isn’t shining and the wind blowing” using pumped hydro, gas, batteries and coal-fired power stations. The implication is that renewables are not reliable and that coal needs to stay in the mix. In return, Morrison and Co. hope to be re-elected on the back of coal miners’ votes in Queensland and New South wales.

While granting the fossil fuel monopolies billions of dollars in tax concessions and subsidies for exploration, railways, ports and research on so-called “clean coal”, the federal government has not committed to ensuring the economic future of mine workers and their communities when the coal mining industry shuts down. See https://australiainstitute.org.au/post/australian-fossil-fuel-subsidies-hit-10-3-billion-in-2020-21/

At the same time, the federal government has refused to properly fund schools, hospitals, public housing, pensions and social benefits to meet the needs of the people.

Gas-fired profits

Although the production and use of LNG causes less pollution than oil or coal, it in fact releases methane into the Earth’s atmosphere at a rate that significantly contributes to climate change and global warming. Coal seam gas production and use, in addition to releasing methane, also pollutes waterways and degrades farmland.

Australia is now the largest exporter of LNG, overtaking Qatar in the last couple of years. LNG exports are primarily to Japan, China, South Korea, Taiwan and Singapore where it is used for heating, power generation, cooking and transport.

The multinational corporations that control the export of Australian LNG are Chevron, Shell Energy, Woodside, Santos, INPEX and Origin Energy.

As stated in Vanguard ( Feb 2019), “Because of a tax system that is completely in the service of imperialism, the multinational companies that control Australia’s oil and gas industry are subject to only one tax – the Petroleum Resources Rent Tax (PRRT).

“The PRRT is a tax on profits generated from the sale of all petroleum products created from onshore and off-shore oil and gas projects in Australia. But aggressive tax avoidance schemes and the off-shoring of profits by the multinationals means Australians are effectively being robbed blind. In 2018, Australia received just $946 million from the PRRT. That’s from both oil and gas. In comparison, Qatar is estimated to receive $26.6 billion from its gas royalties alone.”

The production and use of LNG is promoted by the Morrison government as a “transition fuel”. No mention is ever made of the fact that it can already be replaced for heating and cooking by cheaper renewable electricity such as hydrogen, solar and wind and also for transport in electric vehicles.

Gas fired power generation is still viable for investment finance because Australia has large reserves of LNG, gas fired power stations have a shorter start up time compared with other fossil fuel power stations and they are Australian government backed and promoted. As with all centralised power production, gas use promotes consumer dependency and with government-assisted pricing and tax incentives, extremely high profits. Corporations exporting LNG will resist any moves to limit their operations and will promote their “clean image”. Morrison and Co. will push for gas-fired power stations to replace the aging coal-fired ones.

The strategic importance of Oil

The position taken by the largest energy and mining companies in Australia is focused on extracting the maximum benefit they can out of their investments with little regard to the longer-term interests of the country.

As discussed earlier, it is important to acknowledge the overall strategies of such companies and their application (or non-application) in relation to particular areas of investment and countries. Financial market monitor, Bloomberg Professional Terminal, sees US-based investors as owning more than two-thirds of BHP, two-thirds of Rio Tinto and two-thirds of Woodside. All of these companies are major operators in Australia.

Woodside is Australia’s largest independent producer of oil, producing the equivalent of 900,000 barrels a day. Woodside’s stated policy on climate change includes, “We support the Paris Agreement and its goal to limit the rise in global temperature to well below 2 degrees from preindustrial levels and to pursue efforts to limit it to 1.5 degrees.” It goes on to focus on gas and new technologies.

According to Melissa Clarke, Woodside together with Santos, Origin Energy and AGL have been the most engaged in lobbying climate policy in Australia with the focus on limiting expectations and change.

Oil production is even more essential for capitalism/imperialism – for the generation of profits, for political-economic domination of countries, for military equipment and weaponry, for petrol, diesel fuel, bunker oil, aviation fuel, lubricants, plastics, medicines, etc. State power in USA and Australia now operates in the interests of this section of the (international) ruling class. Therefore we cannot rely on capitalism closing down fossil fuel production fast enough to prevent < 2.0 degrees global warming, let alone 1.5 degrees which is now recognised as practicable by the year 2050.

Nuclear Power bandwagon

With the exception of one nuclear power reactor at Lucas Heights (used for the production of nuclear medicine) Australia has no nuclear capability, no nuclear power stations, enrichment plants or reprocessing facilities. Such facilities are specifically prohibited by Commonwealth law (Environment Protection & Biodiversity Act 1999).

With the Morrison government’s recent commitment to the AUKUS “treaty” and the future acquisition of American nuclear-powered submarines, the pro-nuclear energy lobby has loudly called for a review of the current ban on domestic nuclear energy, under the guise of presenting a “clean” alternative to fossil fuel energy production.

The promotion of a nuclear power industry will increase. It is attractive to capitalism as it presents a new investment opportunity for foreign multinational corporations like General Electric and it centralises the production of electricity and therefore dictates and controls the cost of power to the Australian people.

We will be asked to forget or ignore the prospect of Three Mile Island or Fukushima disasters and the insurmountable problems of waste “disposal” and storage and weapons proliferation.

Fundamental change is needed

This decade will be critical in reducing greenhouse gas emissions to prevent dangerous climate warming from having disastrous effects in Australia and across the world. The global monopoly capitalist/imperialist economic system may indeed be able to adjust to the replacement of coal with renewable sources of power.

But even this will require the need for intense struggles by the people to force federal and state governments to cease guaranteeing the coal industry and to guarantee the futures of the workers and communities as coal production winds down. Many, but not all, may be able to transition into new jobs in the renewable industries. Others who cannot must not be abandoned by governments and certainly not by the organised working class.

Gas and oil corporations are at the centre of the global monopoly capitalist/imperialist system. They exercise direct and indirect power and influence over governments, providing crucial resources for manufacturing and land, sea and air transport. They will not surrender their power and profits without a fight.

Companies such as ExxonMobil, Chevron, Woodside, Shell, INPEX, Origin Energy and Santos control the production, refining and export of gas and oil in Australia. They rely on a network of international banks and investment financiers to support the continuing profitability of fossil fuels, and at the same time, finance their diversification into renewable energy projects. The gas and oil companies have great influence through the Business Council of Australia and the Minerals Council. Their executives, both in Australia and internationally, form part of the ruling class of imperialism which dominates Australia’s economic and political existence. Prime Minister Morrison promotes their influence through his “gas-led recovery” and calling for new gas-fired power stations to replace the older coal-fired ones and continuing support for coal seam gas fracking.

Waiting for their turn to oversee capitalism, the Labor Party leadership never challenges this ruling class domination of Australia. They also have with no program for winding back emissions, and actively support fossil fuel exports and coal seam gas extraction.

Breaking the hold of these companies and rolling back their substantial contribution to global climate warming means radical and far-reaching change in Australia’s ownership and control of resources.

Not only do the old polluting technologies have to be replaced, but the anarchic capitalist system of private ownership which sustains and protects them also needs to be replaced. Socialism, based on collective ownership and participatory democracy, can rebuild the harmony between nature and humanity, and do it more efficiently and effectively.

It calls for determined struggle to expel imperialist domination of the economy, the military, politics and culture. Only widespread mass struggle of the people can force the necessary changes, not waiting and hoping for a ‘progressive’ parliament.

It calls for the ownership and control of Australia’ critical infrastructure and resources to transfer to a revolutionary state of the working people which will lead the people in building a socialist society.

Socialism must ensure decentralised systems of participatory democracy where communities, townships, workplaces, etc. can have meaningful input into the policies and services that affect their lives; a real democracy not only monitoring the implementation of agreed policies but also participating in their delivery. This must involve the intensive rehabilitation of degraded lands, forests, and marine and river systems as well as the continual development and expansion of clean, renewable energy with both large-scale and community battery storage systems.

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