28 May Earth to Australian Governments…..why are you still not listening?
According to the World Bank’s top climate change official Rachel Kyte, the momentum behind countries and businesses moving to price greenhouse gas emissions can no longer be ignored. Nearly 40 countries and 20 regions currently mandate a price on carbon dioxide and the associated measures are estimated to be worth $50 billion.
Kyte went further saying that the interest in carbon markets, taxes and prices on carbon pollution from specific sectors was increasing ahead of a proposed United Nations pact to be signed in Paris this December. According to the Carbon Pricing Watch 2015 report, the global value of emission trading schemes (ETSs) rose by $2 billion to $34 billion. The South Korean ETS which was launched at the beginning of 2015 and the expansion of the California and Quebec cap and trade systems contributed to the $2 billion growth. The growth was slower than expected however, due in part to the decision of the current Australian Government to repeal its carbon tax in July 2014.
The report also highlighted the rapid growth in the number of countries adopting carbon pricing tools, including France, Portugal, Chile and Mexico. The prices vary across the world, from $3 per tonne in Mexico to $130 per tonne in Sweden. Many companies have internal pricing, partly in response to investor concerns that climate change could wreak havoc with returns. Microsoft and Google price carbon at $0-$20 per tonne, BP and Shell price carbon at $20-$40 per tonne and Exxon Mobil’s price ranges from $40-$60 per tonne.
An International Emissions Trading Association (IETA) commissioned survey found that 58% of members expect carbon pricing to expand post Paris in December. The majority also expected China’s national carbon market would be running by 2020, prices in the European Union ETS to increase and Ontario to join California and Quebec’s pricing system. At the launch of the survey results, IETA chief Dirk Forrister stated that the message for Paris was crystal clear-markets definitely matter and policy makers will be challenged to link domestic actions and international contributions.
A new report released yesterday (28 May 2015) by the Australian National University (ANU) highlights the economic risks that may be realised from Australia delaying action on climate change. If action is delayed, the goal agreed by 200 countries of a maximum temperature increase of 2°C will be out of reach by 2030 and the costs of reducing emissions could rise by as much as 82%.
At the launch of the report, ANU Professor Frank Jotzo highlighted the importance of Paris and that recent developments in China, the US and in the European Union in relation to ambitious targets puts pressure on others to follow suit. The ANU report also touched on the implications of Australia not pulling its weight by suggesting that other countries could apply measures including border tax adjustments such as import tariffs linked to the greenhouse gas emissions related to production which are reportedly being discussed by the US and the European Union.
Professor Jotzo also admitted that at a recent conference in Shanghai he was told that China is investigating carbon tariffs which would be applied to imports from countries that don’t have a meaningful climate change policy. Further possibilities include international banks and investors applying higher risk premiums to Australian fossil fuel intensive projects.
The World Energy Outlook produced by the International Energy Agency (IEA) suggests that for every dollar invested in climate action up to 2020, $4.30 would need to be invested post 2020. In terms of Australia, this would translate into 90% of the coal, 50% of the gas and 40% of the oil in Australia being left untouched in order to maintain the 2°C ceiling.
The IEA work also revealed that cumulative CO2 emissions over the next 25 years could amount to 75% of the total from the past 110 years which could further lead to a long term average temperature increase of 3.5°C. With China’s emissions per capita projected to reach the OECD average by 2035, the temperature increase could be as high as 6°C.
One wonders why Australian Governments continue to risk permanent isolation with their stance on climate change. It is one thing to refer to Australia’s geographic isolation as an aspect of our national pride, however I think it is quite another to continue to back ourselves as the country traverses along an increasingly narrow path seemingly “deaf” to the voices of the international community who have already heeded (or are starting to heed) the evidence which suggests there is less and less likelihood of a return the longer the narrow path is.
Australians are continually hearing about the parlous status of the Federal Budget, however I don’t think it would take an Economics Professor to see that the Budget would be in far greater danger if our trading partners initiated carbon emissions related trade restrictions or embargoes.
In fact I think Australian Governments would do well to remember that denial isn’t just a river in Egypt any more!