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3. An Integrated System Perspective

This section examines the integrative concepts that are required to meet intersecting energy-water-carbon challenges, including the Earth System view; resilience as a critical concept for working with connected, evolving systems; and the critical role of knowledge and learning.

3.1 Connections in the Earth System

Key points

  • An integrative perspective is essential because the Earth System—the total system formed by the natural world and its human inhabitants—is deeply connected.

  • Energy, water and carbon underpin many of these connections and therefore interact with ecosystems, the economy and society.



The natural environment and human society are deeply connected through energy, water, carbon and other natural cycles such as nutrients. The total system formed by the natural world and its human inhabitants is known as the Earth System (Figure 2.1). In the past, human societies depended upon the natural environment but did not significantly influence it. In industrial and post-industrial times, humans are having a global effect upon the natural environment through climate change and in other ways, to the extent that this era has come to be known as the ‘anthropocene’—the era when humans are influencing the climatic and ecological processes that maintain their home planet (Crutzen, 2002; Steffen et al, 2004; Rockstrom et al, 2009; Raupach and Canadell, 2010).

Section 2.1 noted three ensuing basic realities for Australia: the connectedness of the system, the impact of climate change and the central role of water availability for Australian ecosystems, production systems and human societies.

Looking further into the human side of energy-water-carbon intersections, additional factors emerge:

  • Human-induced climate change is predicted to result in impacts on Australia through increased temperatures, shifts in water availability including likely drying in southern Australia, shifts in agricultural productivity, increased fire risk, impacts on ecosystems and more (Section 2.2). Australia’s actions to reduce GHG emissions cannot, on their own, abate global climate change. However, these actions are important politically because they form part of an effective global response to a common challenge.

  • Oil remains the single biggest contributor to global human primary energy supply (International Energy Agency, 2009b). It is very likely that global demand for oil will exceed supply within the next 20 years, with consequent increases in oil prices and increases in the economic competitiveness of renewable energy. Further, Australia’s domestic oil supplies are predicted to contribute a progressively smaller fraction of our needs in coming decades. As well as having a major effect on our international balance of trade, this has the potential to drive shifts in energy mix (such as an increased use of coal-to-liquid technologies), which will tend to increase GHG emissions and water use (Sections 4.1 and 4.2).

  • Australia is the world’s largest coal exporter (International Energy Agency, 2009b). Further, coal and other fossil fuel exports represent our biggest source of export income. A global move to a low-carbon economy, with decreased demand for coal, is likely to have impacts on our terms of trade (Sections 4.1 and 4.2).

  • Australian cities, industries and agriculture are between them using almost all the available water in southern regions. This is creating demand for additional water sources and increased water efficiency (Section 4.3), and also raising the need for good governance and market mechanisms to share finite water resources adequately (See Section 5, Recommendation 1).

  • Energy-water-carbon intersections in land systems also interact with food production (Section 4.4; Section 5, Recommendation 3). Domestic responses to mitigate climate change and a high cost for imported oil are both likely to increase the economic attractiveness of bioenergy. Noting that Australia is a net food exporter, this would have both domestic and global impacts on the cost and availability of food. Food stress in developing nations could impede global efforts to reduce GHG emissions if land is cleared to meet increased demand for food production.

  • Australia is a highly urbanised nation, implying that sustainable energy and water use in our cities is central to our future (Section 4.5; Section 5, Recommendation 4).

3.2 Resilience

Key points

  • The fundamental energy-water-carbon challenge for Australia is to find pathways which combine a low-carbon economy, the ability to thrive under water limitation, social wellbeing and economic sufficiency—all in the presence of global uncertainties and shocks.

  • A core concept that can guide the necessary integrative perspective is that of resilience.
    A resilient system can (1) recover from shocks and disturbances, (2) adapt through learning and (3) undergo transformation when necessary.

  • Challenges at energy-water-carbon intersections confront Australian society with the need for both incremental and transformational changes.

  • Transformational change requires ongoing innovative experiments by individuals at local scales, with support from government at the national scale, to provide the diversity essential for finding new pathways.



The need: The fundamental energy-water-carbon challenge for Australia is to find pathways which combine a low-carbon economy, the ability to thrive under water limitation, social wellbeing and economic sufficiency—all in the presence of global uncertainties and shocks. Some of the necessary changes may occur incrementally (relatively slowly and in small steps), while others will call for transformations (rapid changes in large jumps).

This fundamental challenge calls for an integrative approach to the system shown in Figure 2.1, because of the deep connections between system components. Several previous studies have used a variety of methodologies to examine the Australian economy, society and biosphere from an integrative perspective. These include (1) the triple-bottom-line analysis of Balancing Act (Foran et al, 2005), (2) an analysis of the physical economy (Turner, 2008), and (3) qualitative system-dynamics approaches (Proust et al, 2007).

Resilience: The Expert Working Group believes that a core concept that can guide the necessary integrative perspective is that of resilience (Walker et al, 2009; Folke et al, 2010). This way of thinking has the potential to unite the above methodologies and translate their implications into actions.

Three critical attributes of a resilient system are:

  • the ability to recover from shocks and disturbances

  • the ability to adapt through learning

  • the ability to undergo transformation when necessary.

These attributes greatly increase the chances of making the both the incremental and transformative changes that are needed to meet the fundamental energy-water-carbon challenge.

Examples: Recent Australian history offers many examples of changes that illustrate how adaptation toward resilience can occur and some of the factors that assist or impede it.

First, a large-scale example is the economic reforms of the 1980s, especially tariff removal. These changes seeded a transformation of the Australian economy, with manufacturing shrinking steadily as jobs moved overseas and the service sector growing to a large fraction of the Australian workforce. Although there were winners and losers in the short term, it is generally agreed that the changes underpinned steady growth in national per capita wealth.

Second, an example at sectoral scale is the wool industry. The share of the fibre market held by wool has declined steadily over the last five decades, leading to incremental change in sheep grazing across Australia and also a transformative shock through the removal of the wool floor price in the early 1990s. The floor price had been introduced earlier to protect wool growers from international market shocks. While it did this in the short term, over the long term it led to declining resilience at the scale of the entire wool industry, and the transformative shock to individual growers when it was removed was severe. Many regional centres have not fully recovered from these two events.

Third, at an even more localised scale, towns built around a single industry have suffered different fates when those industries have moved on—as in the case of ‘timber towns’ in north Queensland and, more recently, along the lower Murray due to losses and changes in River Red Gum forests. In contrast, the loss of BHP Steel jobs from Wollongong was countered by growth in the higher education sector, through Wollongong University.

These examples demonstrate important and contrasting attributes of resilient and non-resilient systems. The Australian economy overall has replaced manufacturing with new service industries, helped in part by parallel changes in technology such as IT and the internet. In contrast, farming systems optimised for sheep grazing or forestry, for example, have struggled to find viable alternatives. In successful transformations, the systems are made resilient by having the ability to diversify through access to alternative options, through either serendipity or foresight. For instance, Wollongong and Newcastle now have access to diverse economic foundations, including education, as alternatives to their former main support in secondary industry. Before the change occurred, these diverse alternatives could have been seen as costly redundancies which stood in the way of economic efficiency. When shocks arrived, diversity became an essential attribute conferring the ability to recover.

An important point about transformational change is that it requires ongoing innovative experiments by individuals at local scales, and this requires support from government at a national scale. Such approaches are vital to move beyond a ‘state of denial’ about the need for change (‘we can keep doing what we’re doing if we just get a bit more efficient’). Getting beyond this state requires a change in higher-scale support, away from subsidies to not change (to keep on doing the same thing—drought relief for agriculture can be an example of this) and towards support for necessary change.

Hallmarks of resilient systems: Both resilience theory (Walker et al, 2009) and many practical examples indicate some important shared characteristics of resilient systems and the process of adaptation toward resilience:

  • Resilient systems involve both the environment and the people (Figure 2.1), as both
    are interdependent.

  • Resilience is achieved not by preventing disturbances and shocks—which is impossible—but by ensuring the ability to adapt and recover.

  • A resilient society explicitly supports the evolutionary process of knowledge generation and applies knowledge effectively in support of natural, economic and societal goals. As with all evolutionary processes, three elements are involved: diversification (searching for successful strategies), sieving (selection of successful strategies) and amplification (convergence on successful strategies) (Dennett, 1995).

  • Resilience perspectives provide the tools needed to turn potential crises into opportunities for transformation, because these are the times when the flexibility of the system is highest, or when ‘windows of opportunity’ are most open. At such a threshold point, the system can be guided in alternative directions with minimum effort.

  • At energy-water-carbon intersections, adaptation towards resilience takes advantage of potential synergies and uses tensions as opportunities for change. Pathways consistent with such adaptation will reduce GHG emissions, lower overall water demand, maintain overall environmental quality and maintain or increase social and economic wellbeing. In contrast, there are many other pathways which have the potential to satisfy only some essential goals while worsening the outcomes for others, and may also lead to undesirable states from which recovery is difficult—for example, lock-in to high-emissions pathways.

  • Because successful adaptation towards resilience involves evolutionary learning through diversification, sieving and amplification (see the third dot point, above), risk-taking and ‘safe failure’ at small scales are essential for overall success at large scales. The notion of ‘learning by doing’ requires an environment in which systems can fail safely and adapt.

3.3 Knowledge and learning

Key points

  • The resilience perspective defines key roles for knowledge and learning, which are central to success under incremental and transformative change.

  • Australia has a highly effective knowledge system at disciplinary and sectoral levels.

  • This system must meet massive new challenges created by the connections between energy, water, carbon and beyond to ecosystems, the economy and society. These connections, together with the need for overall resilience, demand integrative perspectives.

  • There is a need to strengthen Australia’s capacity for integrative knowledge. The existing focus is on knowledge generation and application in specific sectors. Integrative perspectives require a new, overarching component in the knowledge system.



The critical role of knowledge and learning: The resilience perspective defines key roles for knowledge and learning, which are central to success under incremental and transformative change. Economic historians describe several ‘long waves of innovation’ that have, in the past, resulted in large scale transformations in modern economies (Freeman and Louca, 2001). Examples include the emergence of steam power and mechanisation; the associated industrial production of cotton, iron and other goods; railways; the age of steel and heavy engineering; electrification; the Great Depression; the age of oil; automobiles; automated mass production; and the emergence of new techno-economic paradigms around information and communication technology. The need to adapt to a resilient energy-water-carbon future will engender transformations that are just as profound. As in previous transformations, instability and threshold crossings will be hallmarks of the process. New paradigms will emerge as society, science and technology, social structures, institutional frameworks and cultural standards respond to rapid change.

Australia’s knowledge system: Australia has a knowledge system which is populated by talented, dedicated people and performs better than world average by many measures (Productivity Commission, 2007). This system must meet massive new challenges created by present demands for new knowledge and applications in energy, water, carbon and related domains, including food, agriculture and ecosystem health.

The knowledge system must explicitly support the evolutionary process of knowledge generation and must apply knowledge as effectively as possible in support of natural, economic and societal goals. To fulfil these roles, an effective knowledge system:

  • embraces basic science, foresighting, integration, and design and engineering

  • facilitates the dialogue between research providers and users in policy, management and the private sector

  • has rational priority setting which balances diversification, selection and amplification

  • is adequately funded on time scales consistent with the innovation cycle

  • is nurtured at the highest levels of government

  • is integral to society

  • interacts with the global knowledge system, as purely national approaches are proving insufficient to cope with the confluence of challenges arising from climate change and the need for sustainable growth.

Evolution in the knowledge system: Australia’s learning and knowledge systems have already adapted to global opportunities and challenges. Indigenous knowledge preceded European settlement and has endured. Major adjustments to the European-derived knowledge system occurred as a result of its transfer to the Australian colonies, and also through the Great Depression and war. The ‘modern’ innovation system was formalised nationally in 1916 with the establishment of an Advisory Committee for Science and Industry, chaired by the Prime Minister, W.M. Hughes (National Archives of Australia, 2010). The Council for Scientific and Industrial Research (CSIR) was established in 1926, becoming CSIRO in 1949. Industrial science was required to develop the primary and secondary industries that would generate national wealth for a growing population. These industries developed under changing conditions and were based on the resources that were available at the time.

More recently, sustained growth—including rapid growth in the higher education sector and a desire for stronger research-industry linkages—has resulted in the addition of new components to the knowledge system, such as Cooperative Research Centres and Centres of Excellence that work across government, academic and private institutions. There is increasing interest in balancing public and private investment in research and development as total demand for innovation has increased. Today, technological ‘supply’ includes gross (public and private) expenditure on research and development of more than $20 billion per annum (ABS, 2007a).

The application of knowledge varies across different domains—for example, through the relative reliance on public and private funds, the profile of underpinning disciplines, scale of technology-adopting enterprise, domestic capacity and the global R&D environment. Australia’s rapid industrialisation has resulted in advanced capabilities in energy, transport, water, land use and urban development. These achievements are testimony to Australia’s underlying scientific and technological strengths, including areas of world leadership.

The need for integrative perspectives: The knowledge system as a whole is generally market-based. Australian Government-funded agencies and programs must comply with Innovation Priorities
(see DIISR, 2009) and National Research Priorities (an environmentally sustainable Australia; promoting and maintaining good health; frontier technologies for building and transforming Australia; and safeguarding Australia; DIISR, 2010a) as well as program-specific objectives. Similar priority-setting frameworks exist at the state government level. This ‘purchaser-provider’ approach to public funding can support incremental (and transformative) sector-level change if program-level objectives adapt to energy-water-carbon intersections and the resulting constraints. Business-sector innovation priorities will adapt as pricing structures for carbon, energy and water take effect. Hence, systems that can support the generation and application of sectoral energy, water and carbon knowledge are well-established.

However, twenty-first century problems also need integrated knowledge (Figure 3.1). Large cross-disciplinary projects are not readily accommodated in the current system. Institutional arrangements in some cases act against the generation of the integrated, cross-disciplinary knowledge that is now required. If funded, such projects tend to be relatively short-term or relatively small. Industry-specific requirements and fragmentation of responsibilities across government departments act against a coherent ‘pull’ for integrative knowledge. Such impediments prevent the Australian innovation system from functioning to best effect to meet contemporary, rapidly evolving challenges.
Appendix B shows the multiplicity of Commonwealth portfolios currently involved in energy, water and carbon research (and the absence of a specific reference to water research policy carriage, in contrast to equivalent references for energy and carbon) and Appendix C lists a number of research provider programs. This multiplicity confounds the potential of the system—as it is now structured—to achieve a competitive and contestable market for integrative research.

Figure 3.1: There is a need to strengthen Australia’s capacity to integrate energy, water and carbon knowledge. Existing processes focus on the relationship between knowledge generation and application in specific sectors, often through purchaser-provider relationships (the bottom side of the triangle). Energy-water-carbon challenges also demand an integrative perspective, which requires a new, overarching component in the knowledge system.



Additional action will be required to promote knowledge integration: There is an immediate need (see Section 5, Recommendation 5) for PMSEIC to signal that energy-water-carbon and associated connections require a focused research effort in their own right—they should not simply set the environment within which specific disciplinary or sectoral work is pursued. This will require significant human capital (DIISR, 2010b). Such reforms are important because the present forces pulling towards essential integration are patchy and inconsistent. In an era of rapid transition it is critical to understand the whole as well as its parts.

Global alliances for interdisciplinary research are fostering integrative learning and knowledge systems across disciplines. Examples include the World Climate Research Program
(www.wcrp-climate.org), focused on the physical climate system; the International Geosphere-Biosphere Program (www.igbp.net), with biophysical and ecological focuses; the International Human Dimensions Program (www.ihdp.unu.edu), with a focus on social research; the biodiversity program Diversitas (www.diversitas-international.org); and the fully integrative Earth System Science Partnership (www.essp.org) embracing all of the foregoing four programs.

The absence of comparable programs at the national scale in Australia is striking. Three steps are necessary to rectify this. First, the institutional barriers that foster research segregation must be removed and replaced by factors that promote generation of integrated knowledge. Second, a focused initiative to increase the rate of integrated knowledge generation is necessary, if lost ground is to be made up. Third, systems that ensure continuing, long-term collection of the data that allow integrated analysis of the energy-water-carbon system must be guaranteed. These issues are addressed in Section 5, Recommendation 5.

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