Australia’s Devastating Fires Make an Urgent Case for Nationalizing Fossil Fuels

Why Australia and the United States should take over and shut down fossil fuels.

Carla Skandier February 3, 2020

View of the Dunn Road fire on January 10, 2020 in Mount Adrah, Australia. (Photo by Sam Mooy/Getty Images)

At least 33 peo­ple dead. More than a bil­lion ani­mals lost. An esti­mat­ed 3,000 homes and over 16 mil­lion acres of land dam­aged or destroyed. 

What is happening in Australia should be seen as a cautionary tale for the United States.

This is the toll, like­ly under­es­ti­mat­ed, of Australia’s ongo­ing megafires. These num­bers, togeth­er with the hor­ri­fy­ing images of thou­sands of car­cass­es of beloved Aus­tralian ani­mals like koalas and kan­ga­roos, tourists using masks in a smog­gy Syd­ney Opera House, and NASA satel­lite images of smoke reach­ing as far as Chile, paint a clear image of how dev­as­tat­ing the cli­mate cri­sis can be even for priv­i­leged nations. 

It’s also push­ing Aus­tralians to face the need to part ways with what they have been told is an essen­tial fuel for their eco­nom­ic growth: coal. The continent’s best — and per­haps only — option for doing so may also be its most rad­i­cal: Nation­al­ize the coal indus­try to shut it down.

Australia’s wild­fires, already more than six times greater than California’s 2018 fires, have been direct­ly linked to record lev­els of hot­ter and dri­er weath­er — con­di­tions that are expect­ed to be the new nor­mal as we con­tin­ue to burn coal in an already car­bon-con­strained atmos­phere. Yet, Aus­tralian Prime Min­is­ter Scott Mor­ri­son has been reluc­tant to rec­og­nize the con­nec­tions between the country’s rav­en­ous coal pro­duc­tion and con­sump­tion—coal sup­plies 60 per­cent of Australia’s elec­tric­i­ty and gen­er­ates 3.5 per­cent of Australia’s GDP just in exports — and the destruc­tion his nation is fac­ing. Instead, Mr. Mor­ri­son keeps putting for­ward a focus on job secu­ri­ty and eco­nom­ic sta­bil­i­ty that fronts for a pro-coal agenda.

Yet the record-smash­ing bush­fire sea­son is show­ing that cli­mate inac­tion is, in fact, the great­est threat to Australia’s decades-long eco­nom­ic boom. The megafire and the drought that pre­ced­ed it are harm­ing the country’s tourism and agri­cul­ture, two major sec­tors of Australia’s econ­o­my. The fires have also start­ed rip­pling through the insur­ance indus­try, with ini­tial claims sur­pass­ing a half-bil­lion Aus­tralian dol­lars, a num­ber expect­ed to increase as events con­tin­ue to unfold. Even Australia’s strong coal indus­try is, iron­i­cal­ly, at risk. BHP, the world’s largest min­ing com­pa­ny and 19th biggest green­house gas con­trib­u­tor, recent­ly report­ed that smoke and dust from this season’s fires have slowed the coal pro­duc­tion of its New South Wales’s pow­er plant and mine by 11 per­cent.

Finan­cial experts are increas­ing­ly wor­ry­ing that the fires might as well be the event that will push Australia’s econ­o­my, which per­formed rel­a­tive­ly strong­ly dur­ing the 2008 finan­cial melt­down, toward the unknown ter­ri­to­ry of a 21st cen­tu­ry eco­nom­ic depres­sion. The moth­er of all cen­tral banks, the Bank of Inter­na­tion­al Set­tle­ments (BIS), warned in a new report that the cli­mate emer­gency is putting world­wide economies’ sta­bil­i­ties at risk and might well be the dri­ver of the next sys­temic finan­cial cri­sis.” The report argues that once that hap­pens, cen­tral banks might have no oth­er choice than to act as cli­mate res­cuers of last resort.” Just as dur­ing the 2008 finan­cial cri­sis, when cen­tral banks used their mon­e­tary pow­er to clean the trou­ble­some bal­ance sheets of sys­tem­i­cal­ly crit­i­cal cor­po­ra­tions by inject­ing mon­ey and remov­ing bad assets, these banks might need to inter­vene once again to get finan­cial tox­ins — this time in the shape of fos­sil-fuel assets — out of the eco­nom­ic sys­tem. That would mean, in Australia’s case, the country’s cli­mate-change-dri­ving coal mines and gen­er­a­tion facilities.

The idea of a 2008-like finan­cial inter­ven­tion as a way to deal with fos­sil-fuel strand­ed assets — assets that won’t be exploitable to pro­vide investors the expect­ed returns — is not a for­eign con­cept. Yet, it still fails to tack­le the cli­mate cri­sis head on. More than sav­ing Australia’s finan­cial sys­tem from tox­ic coal assets through a rerun of 2008 U.S. bailouts, the Reserve Bank of Aus­tralia (RBA) should make sure that any res­cue is mar­ried to the actu­al wind down of com­pa­nies’ coal pro­duc­tion. This is nec­es­sary not only to secure the country’s finan­cial sta­bil­i­ty, but to address a rapid­ly expand­ing demand among Aus­tralians for the gov­ern­ment to lead on cli­mate action — which must include putting to rest any ambi­tion to expand BHP, Adani, and com­pa­nies alike dirty coal fleet and retire at least one coal unit per day.

What is hap­pen­ing in Aus­tralia should be seen as a cau­tion­ary tale for the Unit­ed States. Both coun­tries share more in com­mon than pro-fos­sil fuel per­son­nel head­ing their Admin­is­tra­tions, while simul­ta­ne­ous­ly being hit by new real­i­ties of destruc­tive storms and wild­fires. Over the past four decades Amer­i­cans expe­ri­enced 258 weath­er and cli­mate events that sur­passed the bil­lion dol­lars bench­mark, cost­ing Amer­i­cans over $1.75 tril­lion. Wild­fires in Cal­i­for­nia and Alas­ka in 2019 account­ed for $4.5 bil­lion of those loss­es. The two coun­tries also share the shame­ful records of being among the world’s top fos­sil fuel exporters; Aus­tralia as the sec­ond lead­ing coal exporter, and the Unit­ed States on track to com­pete for the top one oil exporter posi­tion with­in the next five years.

This mas­ter­ful con­tin­ued expan­sion of fos­sil fuels paired with increas­ing cli­mate dam­ages make these coun­tries stand as front run­ners for fac­ing the next finan­cial cri­sis — this time dri­ven by fos­sil fuel bad assets. In 2013, Lon­don-based orga­ni­za­tion Car­bon Track­er issued a report expos­ing that Aus­tralia could face a 44 per­cent decrease in its coal rev­enues under a 2° Cel­sius sce­nario; a decline that, accord­ing to my assess­ment, must be even sharp­er in order to achieve the 1.5° Cel­sius tar­get. In that same year, Car­bon Track­er also point­ed to the fact that the Unit­ed States is in a par­tic­u­lar­ly pre­car­i­ous posi­tion, with the New York Stock Exchange rank­ing as the stock mar­ket with the high­est con­cen­tra­tion of fos­sil fuels in their exchanges. As the cli­mate emer­gency becomes more press­ing, any event can be the tip­ping point in expos­ing the real val­ue of fos­sil fuel assets and start a shock­wave through­out the coun­tries’ markets. 

The chaos Aus­tralia is now fac­ing expos­es the need for stronger gov­ern­ment inter­ven­tions to avoid the many threats fos­sil fuel tox­ic assets now impose on soci­ety — in par­tic­u­lar the need for the nation­al­iza­tion of the coal indus­try to rapid­ly decline its pro­duc­tion. Just like the RBA is head­ing to a point when it will be the only game in town,” soon will the Fed­er­al Reserve be the one as well. Instead of wait­ing for a cat­a­stroph­ic event and fur­ther destruc­tion to act on cli­mate, the U.S. gov­ern­ment should take the lead and look at the events unfold­ing below the Equa­tor line as lessons to why the nation­al­iza­tion of the nation’s oil, gas, and coal indus­try should be done now; not after com­pa­nies like Exxon­Mo­bil and Chevron have poured anoth­er $260 bil­lion in new oil and gas fields. If not for the well-being of its own peo­ple, then for the sake of the Amer­i­can and Aus­tralian economies.

Car­la Skandi­er is a Research Asso­ciate with the Next Sys­tem Project, work­ing on address­ing cli­mate change through sys­temic solutions.
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