Labor should ignore business lobby’s whining

3 April 2012

Yesterday, ABC Breakfast host Fran Kelly berated Climate Change Minister Greg Combet for not accepting the ridiculous complaint by business that Australia’s carbon price is somehow “too high”. This is the fossil fuel lobby’s latest excuse, an argument they have been making for months now. Credit where it’s due: I am pleased to say Labor has shown uncharacteristic resolve in standing up to them on this issue, despite having previously caved in to countless other demands, such as compensation for “energy security” and “carbon leakage”.

The lobbyists like to compare Australia’s carbon price of AU$23/tonne, set to begin in July, with lower international carbon prices – the EU price is currently at a record low of €6.04/tonne (AU$7.76/tonne) – and boldly conclude Australia is leading the world in climate action. But this analysis is far too simplistic. When you consider all the things many countries are doing instead of, or complementary to carbon pricing, it is obvious Australia is really a long way behind the leaders. European countries have a variety of climate policies, including feed-in tariffs to support renewables; energy efficiency policies; transport policies; and so on. These measures are probably achieving more than the EU emissions trading scheme (ETS), and help build momentum to lift the EU’s overall ambition. The UK recently introduced a floor price. Even in the US, where the government is failing to do anything, environmental campaigners have succeeded in closing 106 coal power plants. China is expected to cap coal consumption from 2015. The Maldives is planning to be carbon-neutral by 2020.

One reason why the EU market carbon price is so low is because the aforementioned policies take much of the load off the emissions trading scheme. Also, the European carbon price has crashed because the economic recession has cut emissions, so the ETS isn’t driving any significant cuts beyond what would have happened anyway. The EU ETS (like Australia’s) has a number of important design flaws that are undermining its effectiveness. European politicians are currently debating whether to increase their emissions target and/or cancel surplus emissions permits, but so far any such move has been blocked by Poland. Just because their ETS is badly designed is no reason for us to follow their example. Australia should encourage the EU to fix its scheme, rather than use it as an excuse to further water down our own.

But comparing Australia’s policies to those of other countries is missing the point. With the exception of the Maldives, there may be no country on Earth who is doing enough. The true cost of emitting a tonne of CO2 is probably far higher than €6.04 or AU$23; indeed it could be up to US$893 (AU$861). In other words, there is a significant risk the damage is so high that practically any measures to move to a zero-carbon economy are worth taking.

We need urgent and radical change to the global economy. The extent of climate impacts centuries and millennia from now will be determined by policy decisions taken in the near future. The Government’s own Climate Commission has identified the 2010s as the “Critical Decade” for climate change mitigation. To avoid passing tipping points for dangerous climate change, humanity must return the Earth to energy balance, which means reducing atmospheric CO2 to ~350 ppm. Because of the long lifetime of CO2 in the atmosphere, to reduce its concentration everybody needs to cut fossil fuel emissions to zero or near-zero within a couple of decades. We cannot afford to burn most of the world’s fossil fuel reserves. The central solution is to switch to 100% renewable energy as rapidly as possible.

Australian action should not be conditional on international action. If everyone followed the “you go first” argument, then nobody would ever do anything. Unilateral action is required to get a momentum for global action. Rich countries like Australia have the means and obligation to act first, while developing countries need (and arguably deserve) assistance from us to follow in our footsteps. If anyone has an imperative to take a leadership position, it is wealthy, sunburned, fossil-fuel-intensive Australia.

Australia’s emissions are in the top 20 out of 200-odd countries, and our per capita emissions are in the top 10. Our historical emissions mean we bear considerable responsibility for the carbon already in the atmosphere. We still get about 70% of our electricity from coal. We have the world’s fourth largest proven coal reserves, 9% of the global total. Australia is the fourth largest coal producer and largest coal exporter. This cannot be ignored, because many of the countries importing our coal are not subject to binding emissions targets. Our exports are helping to fuel the growth of emerging economies like China. Within a decade, the impact of our fossil fuel exports could quadruple to 9% of today’s global fossil fuel emissions. Australia can make a very real difference.

Australia is a rich nation relatively unaffected by the global financial crisis. We have an abundance of sunlight to harness. The Zero Carbon Australia 2020 Stationary Energy Plan has shown Australia can achieve 100% renewable energy in ten years, by rapidly scaling up existing technologies. What is lacking is not feasibility, but political will and financial investment

The fossil fuel industry’s central argument against climate action is that it supposedly will damage Australia’s competiveness, but this argument can be turned back on them. Environmentally unsustainable investments are ultimately also economically unsustainable. The fact that most fossil fuels are unburnable means the market contains a “carbon bubble” of high-carbon investment. It is inevitable the carbon bubble will burst sooner or later, and this is likely to occur abruptly and within years. When the bubble bursts, more than $20 trillion worth of reserves will become stranded assets and the value of fossil fuel companies will plummet.

Therefore shifting investment from fossil fuels to renewable energy is not only the right thing to do: it is also in Australia’s long-term financial interests. Those countries least reliant on fossil fuels will be most competitive. Regardless of current international action, Australia should take a real lead and aim for 100% renewable energy as soon as possible, campaign for other rich countries to join us, and help poor countries to follow us.

One comment

  1. Does anyone know how other countries compare with Australia in handing back the money raised from the carbon tax / ETS to the polluters and end users?

    It seems to me that our carbon tax is a bit like the government adding a $40 tax to each pack of cigarettes but then compensating tobacco companies $20 per packet sold and also compensating smokers by giving them a rebate of $20 for each packet they buy.

    Clearly such a high anti-smoking tax will be next to useless.

    Similarly though everyone goes on about the high price for carbon the effectiveness of the scheme is significantly watered down by the way that Labor is just handing the money back.

    Are any other countries as stupid as us?

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