Climate policy: a new momentum


The climate change policy debate is alive again in Australia, and the recent scrapping or deferral of spending on climate-related programs has probably reinforced the government’s determination to introduce a carbon price. But what level of ambition should Australia strive for – what level of carbon price and what emissions reductions target?

Ross Garnaut has been commissioned to provide an update of the 2008 climate change review. The second and third update papers, released this week, examine progress towards global climate change action, and global emissions trends. Both are important in calibrating Australia’s policy.

The emissions trends paper, released today, provides an updated projection of global emissions, and their drivers, in the absence of effective mitigation action. It gives a measure of the magnitude of the task. The analysis shows that the global financial crisis and recession in the developed countries in the northern hemisphere didn’t give the atmosphere a break. The overall growth momentum for global carbon emissions remains almost the same, with business-as-usual emissions doubling between 2005 and 2030.

What has changed since the 2008 assessment is the balance between the developed and the developing world. While Europe’s and America’s growth prospects have probably been dented, the outlook for rapid economic expansion in the developing world seems even better now than it did three years ago. China continues powering ahead, India is growing much faster than anticipated, and many other developing countries could follow, entering long periods of fast, sustained growth. The projected amount of energy that will be used per unit of GDP has been revised moderately downwards, because of expectations of higher prices for oil and other fossil fuels, but this does little to change the picture.

Actual carbon emissions will, in all likelihood, be substantially lower than in a business-as-usual scenario. This is because many countries have already got climate change mitigation policies in place, and Copenhagen Accord commitments by the major countries – crucially including China – imply substantial extra reductions below a no-action scenario. Countries’ pledges are unilateral and defined in different metrics, and there is no binding global agreement, but the bottom-up approach to international climate policy may well result in substantial action.

And the shift in global growth momentum to developing countries suggests (at first glance paradoxically) that developed countries cannot relax in their efforts to curb carbon emissions. Rather, achieving the same global outcome will require the rich world to go lower in their emissions, as the developing world takes up a greater share. Yet going lower need not be more expensive, as the underlying growth momentum is less also.

In his paper, Progress Towards Effective Global Action on Climate Change, Ross Garnaut takes a close look at recent and prospective climate policy developments in key countries. He finds strong policy actions and commitments in China, and argues that the United States is still committed to a substantial emissions reduction objective, despite big political obstacles to early domestic action. This commitment is supported by regulatory measures, government support for low-emissions technologies, state-based initiatives, and the availability of new large and cheap sources of gas that can replace high-carbon coal.

These international developments mean that the pressure is on for stringent domestic mitigation policies in Australia. Pointedly, Professor Garnaut states that if Australia “ceased being a drag” on international climate action, this alone would already be a significant improvement. Australia may be small, but it is one of only a small number of significant developed-country players in the global climate change arena, and what Australia does or does not do is noted internationally. And with international commitments not having legal status – at least for the time being – domestic policy action is the best indicator that the world has on any country’s intention to contribute to the global effort.

Australia is in a curious position, as the only major developed country that escaped the 2009 recession, and with continued strong growth driven in part by mining and gas extraction. Without new policies, energy use and carbon emissions are on a strong upward trend, projected to rise to 24 per cent above 2000 levels, according to the government’s latest report, released this week. If this translates into a less ambitious emissions target, we can expect no sympathy from the international community including our trading partners: if the highest per-capita emitter of the major countries in the world decided it could not afford more climate change mitigation action because of a resource boom that is making it rich fast, the irony would be bitter and the backlash assured.

The upshot is that stronger policy action will be needed to achieve any given reduction. Treasury modelling from 2008 indicates that any reduction below year 2000 levels will require a carbon price higher than that currently prevailing in the European Union. Investing in mitigation action overseas will also have to be part of the equation, along with fostering carbon uptake in soils and forests. And if the history of environmental policy efforts is anything to go by, then it will be nowhere near as costly or painful to achieve the objective than it might seem now.