To date, climate change has barely rated a mention in the 2016 Australian Federal double dissolution election campaigns, and we don’t know when or if it will feature at all. I want to use this opportunity to bring a particular aspect of climate change – carbon pricing – to people’s attention and highlight just why it needs to be taken very seriously. According to the United Nations Global Compact (UNGC) initiative, the minimum internal carbon pricing policy that all countries should implement by 2020 is US$100 per tonne. This means in view to keeping global warming below 2°C as negotiated in the historic Paris Agreement following the 2015 United Nations conference on climate change, to which Australia was a signatory, all business producing emissions must be charged for each tonne of CO2 they release into the atmosphere.
The proposal for a universal US$100 per tonne minimum internal carbon price by 2020 was included in an announcement by UNGC on their website on April 22 this year, the same day the historic Paris Climate Agreement was signed by more than 165 United Nations member countries at UN Headquarters in New York. The UNGC believes that the US$100 per tonne minimum price is critical to prompting innovation, unlocking investment and shifting market signals towards the maximum2°C average warming pathway.
This price reflects the enormity of the universal emissions reduction task we face in coming years, and therefore pricing carbon should not simply be viewed as a revenue stream. According to World Bank Group figures, approximately 75% of the emissions reductions covered by Government-implemented carbon pricing mechanisms including emissions trading schemes (ETSs) around the world last year were priced below US$10 per tonne.
In January this year the International Monetary Fund (IMF) stated that carbon pricing mechanisms should be central to a Government’s climate change response. According to the IMF, such mechanisms have key advantages over regulatory based emissions reduction measures. These advantages include being more effective from an environmental perspective and that they can facilitate a wide range of mitigation options. The international Organisation for Economic Co-operation and Development (OECD) researched carbon pricing in 41 member countries that represent 80% of the world’s energy use and emissions last year, and concluded that 70% of those emissions were priced below EUR5 (US$5.60) per tonne. The OECD argues that such a price is well below the true climate related cost of those emissions and that there is barely any policy driven price incentive to reduce emissions at that price.
there is currently no government regulated carbon pricing mechanism in Australia
Internal carbon pricing is becoming a widely used investment decision-making tool by businesses around the world (including a small number of Australian businesses), assisting them to move to lower carbon business models. As there is currently no government regulated carbon pricing mechanism in Australia, the small number of Australian businesses that have an internal carbon price do it on the basis of the need to have one in the markets in which they conduct business outside Australia. If the ALP forms Government following the election on July 2 and implements their proposed ETS policy, or the current Government introduces an ETS by tweaking the ERF, businesses that conduct their operations within Australia will also need to determine their internal carbon price.
Determining an internal carbon price is a good thing for Australian businesses for two reasons. Firstly they could then participate in the Australian ETS (and other worldwide emissions trading schemes the Australian one is linked up to). Secondly, having an internal carbon price could open up new international trade and investment opportunities. In previous articles I have discussed the move by some very well known international brands to look at their supply chains and to choose suppliers based on whether they have an internal carbon price.
Given the rate at which ETSs are being implemented around the world, it is likely that most countries will have one in the very near future, and therefore an internal carbon price will become part of normal business operations. In the lead up to the double dissolution election on July 2, a lot of attention is being given to jobs and growth, and of course these are important. I believe that both the ALP and the current Government need to embrace the potential jobs and growth that can arise from investments in emissions reductions and innovation under an ETS. Of the few Australian and numerous international businesses that have disclosed they currently have an internal carbon price, more than 94% are based in jurisdictions that have mandated a carbon price, have scheduled the implementation of a carbon price, or are considering the implementation of a carbon price.
As the world’s largest corporate sustainability initiative, the UNGC supports businesses to:
- Conduct their operations in a responsible manner by aligning with ten principles of human rights, labour, environment and anti-corruption
- Take strategic actions to progress societal goals including the UN Sustainable Development Goals, with an emphasis on collaboration and innovation
The UNGC’s ten principles are derived from the Universal Declaration of Human Rights, the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development and the United Nations Convention Against Corruption.
Emissions from Australia impact other countries around the world and vice versa as a result of atmospheric circulation, which is the large-scale movement of air by which heat is distributed on the surface of the earth. Despite not hearing anything in Australia with regards how our emissions impact other countries, international research has shown that emissions from China can be transported all the way to the US west coast. On this basis therefore, it is reasonable that emissions from Australia are also impacting neighbouring countries.
In Paris last December during the United Nations Conference on Climate Change, more than 190 countries demonstrated that they could reach agreement that we need to keep average warming across the world to 2°C. On April 22 this year in New York, the resulting Paris Climate Agreement was signed. Such global unity demonstrates that Governments can commit to upholding signed agreements, can acknowledge the realities of climate change and can address the inherent challenges that climate change presents.
we have already had three weeks of the 2016 Australian Federal double dissolution election campaign and climate change has barely rated a mention
That we have already had three weeks of the 2016 Australian Federal double dissolution election campaign and climate change has barely rated a mention is a sad indictment. And yet conversations being had in other contexts show great public concern for the growing environmental impacts climate change. There is no shortage of discussion on social media platforms such as Twitter regarding the current status of the bleaching of the Great Barrier Reef – which has made international news on high profile platforms including The New York Times. The lack of a reasoned scientifically based discussion of what Australia is going to do to acknowledge the realities and address the inherent challenges of climate change leaves us wondering when and if such a discussion will be held by politicians, and whether the media will challenge the respective parties to do so. We know that climate change can’t be solved within one term of Government in Australia, however we should expect Governments that act on our behalf to acknowledge and address the challenges that climate change presents now and for future generations.
The importance of carbon pricing goes beyond the role it plays in reducing emissions. Australian voters need to understand that carbon pricing and its implementation can facilitate innovation and investment, and that a cohesive pricing structure is critical. The Government elected by the Australian people on July 2 needs to implement a price that is consistent with the enormity of the task of reducing emissions to align with the maximum 2°C average warming agreement so Australia can play its rightful part in reducing global emissions into the future. Our country’s leaders must ensure we as a nation adequately acknowledge the realities of climate change and address the inherent challenges that climate change presents. Climate change is an issue that simply can’t be left for future generations to battle. This is why Australian voters should be getting stirred up about carbon pricing.