Welcome to 2019! Two seemingly very different news stories caught my attention over the last few days. One was the big story about massive fish die outs in the Menindee Lakes and elsewhere in Western NSW.

The other was an obscure story about implementation of a tradable permit scheme to encourage production of electric vehicles in China.

A lot has been written and said about the Menindee Lakes incident, so I am just going to add few things. Firstly, while obviously linked to the wider Murray-Darling problem , the immediate cause of the Menindee incident was not so much about water quantity problems, but rather water quality issues. There seem to have been an algal bloom event, triggered by high temperatures and by high nutrient concentration in the water. These nutrients typically come from agriculture, as residues from phosphate and nitrogen fertilisers that runoff or leach. As nutrients build up in the water, algae start developing, and as algae die out they deplete the dissolved oxygen, which in turn causes suffocation of the fish, and hence the fish die. Now, the problem of nutrient water pollution is exacerbated by the lowering water volumes. The occurrence of algal blooms is more likely and more severe when it happens in a water body diminished in size, compared to a water body that is full. We researched this very issue in the case of the Warragamba Dam near Sydney, and we showed that how full or empty a water body is matters enormously for nutrient pollution and for the optimality of the efforts for its abatement. The paper was presented at last year’s World Congress of Environmental and Resource Economics in Gothenburg, Sweden (http://fleximeets.com/wcere2018/?p=programme#; search for ‘Ancev’) and is currently in preparation for submission to a journal.

Secondly, the Menindee incident was rightly linked to the overall Murray-Darling Basin situation, and specifically, to the MDB plan. Two points about this: one, a brand new paper by Quentin Grafton that provides detailed policy analysis of the MDB has just appeared in AJARE (also available on Researchgate). It is a comprehensive review, and pinpoints the key problems in the MDB that need to be rectified.

My second point, which kind of links to the Chinese electric vehicles story, is that the water reform in the MDB has been fundamentally based on the establishment of strong and tradable water use rights. Having well defined and tradable property/use right on natural resources is a necessary prerequisite for efficient management of those resources, but as the Menindee incident teaches us, it is not a sufficient condition for good management.

Little is known about the new Chinese rules around the support of electric vehicles, but it seems that there will be no new approvals for internal combustion engine only automobile factories, and that carmakers will face a quota on minimum number of electric vehicles that they have to produce. This quota will be managed through tradable credits, so that a non-complying carmaker could purchase credits from another that has surplus credits. It’s an excellent example of how tradable permit rights (TPR) (in this case, it is effectively a TPR on emissions from automobiles with internal combustion engine) could be used to attain certain environmental and energy policy goals in an efficient way.

The principles of tradable permit rights are the same in the case of water rights in the MDB and in the case of the new Chinese electric car scheme: tradable permits create incentives for most efficient users to use the resources, or to provide most pollution abatement. This makes TPR powerful economic instruments for natural resource/environmental policy. However, it needs to be kept in mind that simply implementing a TPR is not going to solve the problem in its own right, but that other institutional and policy factors need to be present for a successful outcome. Unfortunately, we were shockingly reminded of that in a most stark way at Menindee last week!


I was in Hong Kong last week, attending a workshop on renewable energy at the Chinese University of Hong Kong. The focus of the workshop was to explore factors that drive deployment of individual sources of renewable electricity generation, specifically wind and solar, to understand why there have been diverging trends of those two in different countries, and to investigate the effects of the changing balance between wind and solar on the electricity supply.
The workshop was organized under a Worldwide Universities Network project, and featured speakers from mainland China, Hong Kong, Japan, India, Germany, Switzerland, France, Russia, UK, US, and Australia. The talks showcased the multidisciplinarity of this topic, with individual presentations coming from a range of areas such as policy, business analysis, governance, law, economics, and urban/rural studies. All talks did have firm foundation within social sciences, so the multidisciplinary nature of the workshop had a nice focus on the social science aspects of renewable energy phenomena.

At the end of the workshop, participants were able to sketch out an overarching way of thinking around the dynamics of individual energy sources, the effects of those dynamics, and the policies that are needed to manage energy transitions. Specifically, one can start by thinking about drivers behind individual energy source accelerated or decelerated penetration (e.g. in many countries solar has seen accelerated, and wind decelerated penetration over the last 5 years), such as costs, higher level policies and programs, technical characteristics and technological progress, and public perceptions. Then, the process of deployment of individual energy sources is examined, often in parallel with specific support polices. This stage is highly uncertain, as there may be variety of factors that influence penetration of an individual energy source apart from the supporting policy, and the outcomes from this implementation stage are hard to predict. The last stage in the framework is an evaluation stage, where we can investigate the ex post effects from the implementation stage, in terms of the effects on electricity prices, reliability of electricity supply, and wider social outcomes. In order to manage the uncertainty in the implementability stage, feedback policy rules that flow from the evaluation to the implementability stage are needed. These feedback rules should be used to alter the parameters of the supporting policies or other management levers in the implementability stage in order to improve the outcomes. This is called Adaptive Dynamic Energy Transitions Management.

The need for this type of overarching framework was evident at the workshop, where examples of energy transitions from a large number of individual countries were presented. This evidence suggests that we currently have no clear understanding of how to adequately manage energy transitions, as the same high-level programs and specific policy levers seem to lead to different outcomes in different jurisdictions. The participants in the workshop agreed to continue to work together to tackle this gap in knowledge, hopefully resulting in improved ability of human society to achieve cleaner, more efficient, affordable and reliable energy systems in the future.


Federal Government’s proposal on a National Energy Guarantee (NEG) has been among the top news items in Oz for some time now. The government is touting the NEG as a centrepiece of its policy reform in the electricity sector, which will ensure stable, reliable and affordable electricity supply to households and businesses beyond 2020.

There are critics left, right and centre. In fact, critics from the left and right may come together in opposition to the NEG, and attempt to block it in the Parliament.

On 1st August, the Energy Security Board released the Final Detailed Design of the National Energy Guarantee. This is really the document that should be evaluated in order to have a rational debate on the proposed reform of the electricity supply chain and markets. An impression that I get from reading this document is that it is highly-professionally prepared, with obviously a lot of thought and effort put in from engineers and economists who understand the details of how our electricity system works. Overall, I think that it is a good document, and that the design of the NEG indeed addresses many of the shortcomings of the current electricity system, perhaps most notably the shortcomings on the National Electricity Market, where speculative and manipulative behaviour has been bordering legality, and has undermined the effectiveness of the system.

However, when it comes to the ‘reliability guarantee’ it seems that it effectively amounts to guaranteeing a role for the fossil fuel power generation in the future electricity system, by requiring the retailers to contract with at least some fossil fuel generators. Supposedly this is going to be offset by the ‘emissions guarantee’, which in a way secures a role that renewables will play in the proposed new system. But, the trade-offs between the guarantees are not well described in the document, and indeed, are hard to justify. Guaranteeing the place of fossil fuels in the electricity generation mix is going to prevent closures of coal-fired plans and perhaps (but not likely) encourage building new ones. In other words, it is going to slow down our transition to less/no fossil fuel electricity system. This hardly seems like a good energy policy goal for the 21st Century.

At the end, I can understand why the designers of the NEG wanted to have something for everybody in the proposal. They must have been trying to strike the balance between the proponents of the ‘old’ fossil-fuel based electricity system, and those of the ‘new’ renewable-based system. That’s precisely why the proposal is drawing the wrath of the extreme views on both sides of the political spectrum. It is hard to say whether striking the balance was the right strategy, or perhaps the designers should have gone bolder towards embracing the future, which certainly doesn't lie in energy from fossil fuels. But, guaranteeing the place of fossil fuels in electricity generation might prove to be necessary for even getting a green light on the NEG from Government’s own ranks. Another example of politics as the ‘art of the possible’. We've seen too much of that from this Government!


Just last week I wrote about how the Government is making the same mistakes in allocating funding to the Great Barrier Reef (GBR), as it did with the Murray-Darling Basin (MDB) over the period 1997-2009.
It turns out that they are repeating the same errors again with the MDB. The Senate is set to vote tomorrow (8th May, 2018) to amend the MDB Plan. This involves scrapping the requirement for some additional 600 gigalitres (GL) of water to be kept for environmental purposes in the Basin, which was a commitment of the original MDB plan.

Instead, the government is proposing to spend $1.3 billion on variety of programs, mostly to be implemented in Victoria and NSW, which are supposedly going to save some 600 GL of water, thus somehow offsetting the equivalent back-down on environmental water commitment.The big problem with this is that the projects to be funded are going to be hugely cost-ineffective, just like all the environmental projects that were implemented in the MDB in the past.

Public funds are going to be spend, and special interests in Victoria and NSW are going to be served, with very little positive environmental outcomes, and at enormous costs per unit of environmental outcome (i.e $/ML of water saved). This is all something that we have already seen, analysed, and showed that it is a poor way to go about securing environmental water in the MDB. But, the government doesn’t seem to care. Elections are coming, and pork-barreling is the name of the game! Sad, really!


You can tell elections are around the corner when governments start announcing nice, round-number plans to save this and that. This time it is the Great Barrier Reef (GBR), with the Commonwealth Government just announcing a $500 million program to tackle several problems that threaten the wellbeing of the reef (I note the really awkward reference to driving and protecting jobs in the Government’s announcement. It seems like a really cheap attempt to stamp ‘jobs’ over pretty much anything, even if it is not relevant at all).

Most people would agree that this is a worthy initiative. Knowing this full well, the government has just made the announcement without providing much detail on how the pledged funds are going to be spent. From government’s perspective, the point is to play the tune that the electorate would like to hear, and not to worry about the details. However, when it comes to complex and wicked problems, such as the health of the GBR, all the devil is in the detail.

We have seen time and time-again governments committing huge amounts of funding to rectify problems with high electoral salience, only to find out that all those money spent were to very little avail. A good example is the Murray Darling Basin (MDB): some $25 billion dollars were committed and spent on various programs to improve environmental conditions in the basin over the period 1997-2009 (Lee and Ancev, 2009) with very little actual effects. Indeed, even today environmental problems in the basin are rife.

I can see nothing in the government announcement on the GBR that would suggest that this time it’s going to be different. Funding is committed to broad areas, and typically to areas that will keep various stakeholders quiet for some time. For example, sugar cane farmers who have been repeatedly linked to the poor water quality in the reef due to excess use of fertilisers that ends up running off into the reef, are set to gain some $200 million under the program. This will effectively amount to subsiding cane farmers in their efforts to reduce nutrient runoff. I am not a big fun of subsidies, not in this nor in other cases, as we know that they create serious perverse effects, as well as negative fiscal implications. The evidence from the MDB is that subsiding irrigators to reduce their water use did not work very well. There is nothing to suggest that subsidies will work in the case of the GBR. In addition, I am particularly averse to subsiding production of sugar, as it has huge negative effects not only on environmental health, but also on human health.

Taking initiative on improving the state of the GBR is a worthy cause. Of course it is very important, and of course it requires funding. I just wish that politicians can resist opportunities for quick positive publicity by committing large sums of public money to programs that are not well thought through. We could be doing so much better with that kind of money! We could be really saving the reef, rather than just posing and appealing to popular views and to special interests!


A recent statement by the Australian Medical Association caught my attention. The medicos are declaring a war on sugar, calling for taxes on sugary drinks, ban on advertising unhealthy food to children, and removal of vending machines selling unhealthy food and drinks in medical facilities. This last point I particularly like.

I have been noticing all these vending machines around the campus at Sydney University. What are they selling: the worst possible drinks and snacks, loaded with sugar and other nasties. And who are they selling to: typically to students and academics stuck at Uni after hours, when all cafes and regular shops are closed. But the type of food and drinks on offer is something that is least needed in that situation. An apple, a banana, some walnuts or almonds, or some plain milk (perhaps soy milk) would do those folks so much better than a can of Coke, or a Kit Kat bar.

A little less known sugar dispensing device is hidden in the kitchenettes of the various University departments. These are so called 'charity snacks' where you can get some chips or a Cherry Ripe bar in exchange for a specified 'donation'. Really just another type of unhealthy vending machine.

It is time we stopped this practice, and certainly Universities are good places to champion such a change. We should ask for the content of the vending machines to be replaced with much more healthy options, and we should not allow unhealthy food and drinks to be sold through vending machines on campus. It is not hard to imagine a vending machine that dispenses apples, salads, or good nuts (not just salty peanuts). This would be good for the health of academics and students, and will set an important example to the wider community.

It would also be good for Planetary Health, an initiative that was recently unveiled at Sydney University.
I have written before on this blog how sugar through its whole supply chain is not only causing human health issues, but also environmental, and even economic health problems.The more I think about it, the more I am convinced that it is an excellent example of how a supposedly sophisticated food supply chain is very detrimental to Planetary Health. Sugar is certainly not alone (just think palm oil), but it is a good place for humanity to start seriously reconsidering how we produce, distribute and consume food. Putting a stop to the practice of selling expensively packaged sugar through the vending machines would be a first step in a right direction!


The year draws to a close in December with all the festive time, and once every couple of years the time of releasing a new Star Wars movie. This year was a ‘new Star Wars movie’ year, which inspired me to the title of the current blog entry. However, the entry is not about the movie but rather about the convulsions through which fossil fuels are going in their way out. I have written before about the inevitability of the energy transition away from fossil fuels. The speed of this transition is very much dependent on how big businesses in the energy sector position themselves in the process. And this December we saw a clear message from one of the largest energy businesses (our own BHP) that sticking staunchly to the fossil fuel energy mantra is not the way of the future. BHP has threatened to quit the local and global coal lobby groups over their essentially ‘denialist’ stance on climate change and aggressive tactics against competing non-fossil fuel energy sources.

At least locally in Australia, the year that is just passing has seen some of the nastiest campaigning against renewable energy sources, inconspicuously backed by the coal industry (I recall an issue of the ‘The Australian’ sometime in September with ‘coal is good; renewables are bad’ slogans and articles all over it). The campaign against renewables has been particularly ferocious in the light of the so called ‘energy crisis’, blaming wind and solar for reducing the reliability of the electricity supply networks and for increasing electricity prices. However, there is no clear evidence that this is so, as the reliability and prices are influenced by many factors, and not solely by the generation mix. In fact, together with a group of international colleagues I have just been awarded a small grant by the Worldwide Universities Network to investigate the effect of renewables and the mix of renewable sources (i.e. wind vs. solar mix) on the reliability of the electricity system and on electricity prices.

The process of weaning-off fossil fuel powered society is well underway. But, it will last a long time and there will be numerous turns and twists along the way. 2017 has seen some important episodes of the ‘coal wars’. Let’s hope that 2018 will bring more resolute moves into the right direction. May the cleaner energy be with us! Happy New Year!