Should we extend property rights to the atmosphere?

Sun and wind are intangible. It’s hard to sell them. But the State can make big money if it owns fossil fuels. Rory MacLeod

While Australia aims to produce a fifth of its energy from renewable sources by 2020, non-renewable energy is still flourishing. But non-renewable energy sources such as coal and gas have a significant advantage over wind and solar energy: they can be owned. So, what do property rights have to do with reducing carbon emissions and moving to renewable energy?

Coal and gas are non-renewable energy sources and are classed as minerals. In most Australian States and Territories minerals are owned by the State (see, for example, Victoria), even if they lie beneath private land. This separation evolved from concepts endorsing the separation of land ownership at the surface from mineral ownership. Accentuating the distinction is the fact that minerals are tangible, so that their extraction and use is quite intuitive.

This separation of ownership rights gives the State considerable power over the development of non-renewable energy projects. The State retains the power to issue rights to mining companies which include the right to conduct exploration, the right to access private land, the right to construct operations and the right to extract minerals.

Contrast this with renewable energy like wind or sunlight. Sunlight and wind are intangible, they can’t be touched or handled, and therefore can’t be owned in the same way as minerals. The natural, kinetic process of renewable energy necessarily operates beyond the parameters of private control.

This means that the State is incapable of controlling renewable energy resources in the same way that it controls non-renewable resources. As such, the core rights to construct and develop renewable energy projects necessarily reside with the owner of the land where the project is located. The State can impose regulation, such as planning or noise control, but the landholder decides whether a project can proceed. For example, a farmer who owns grazing land decides whether to grant a wind power company the lease to construct wind turbines on their land.

The different ownership perspective of non-renewable energy resources has promoted a flourishing market. Ownership gives the State full control to develop a licencing framework and help investors mitigate hurdles such as land access and compensation. For example, coal seam gas mining licences include rights to access private land where the gas may be located, rights to construct operations on that land and rights to extract the gas itself. Once extracted, ownership of the gas generally passes to the licence holder. This framework supports an expanding industry; the resource is more amenable to State control and this reduces the risks and uncertainties for investors.

By contrast renewable energy projects have been hindered by regulation and landowner objections. When a wind farm is constructed on private lands, the States have no power to interfere with the right of a landowner to refuse access and the wind energy company must negotiate privately with the landowner. It is not possible for a State to simply allocate development rights in the absence of landowner consent.

This means that the progression of wind energy projects is often dependant on the success of private landowner negotiations. These negotiations can be arbitrary and expensive, and often significantly hinder the progress of wind energy projects in Australia.

The progression of non-renewable energy projects has become increasingly vital for climate change mitigation. The solution does not lie in a fundamental shift in ownership perspectives but rather, in an increased understanding of the limitations of the difference. It is not feasible to impose ownership rights upon emancipated resources such as wind and solar, which lack any tangible or defined presence. It is, however, possible to develop a regulatory framework that further incentivises the implementation of renewable projects. For example, a framework where farmers receive significant government subsidies for endorsing wind farm development would encourage the expansion of this fledgling industry. Similarly, a framework where rights to access solar energy were properly protected through regulated statutory easements may significantly improve market impediments for the solar industry.

There is no doubt that there is a strong link between an expanding non-renewable energy sector and the ownership framework that supports it. Being aware of this connection ensures that both the government and the community are better equipped to appreciate some of the preliminary difficulties faced by the renewable energy sector.