Global investments in clean energy will, for the short-term, be based on existing markets but considerable uncertainty remains around ambitions for long-term emission reduction obligations. This has major implications for investments in greenhouse and capital intensive investments. As we have seen in both Australia and the US this uncertainty is already deferring new investment in power generation.
Avoiding dangerous climate change will require decisive global action. In a paper published on the first day of the Bali meeting, researchers from the Australian Commonwealth Scientific and Research Organisation (CSIRO), The Climate Institute, Monash University and McLennan Magasanik Associates concluded that it is clear from the climate science that Australia is likely to be more adversely impacted by climate change than most other developed nations. This implies that Australia has a stronger interest than most in arguing for deeper and more rapid cuts in global emissions.
Based on macro-economic modelling from the Centre of Policy Studies at Monash University, the study found that the negative impacts of a 50 per cent reduction in world emissions, and associated Australian action, are likely to be modest and manageable. The modelling suggests that achieving a 40-100 per cent reduction in Australia’s net emissions by 2050 (including through the purchase of international emissions credits) is consistent with strong economic growth. Gross Domestic Product increased more than three fold over the 45 years to 2050 across all scenarios modelled and grew from less than $1 trillion today to over $3 trillion (current 2005 dollars) in 2050 in all scenarios.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
A particular challenge for Australia will be how it defines and undertakes a new diplomatic strategy towards the US to ensure the current Administration does not hinder progress on the road to Copenhagen. Relationships with any new US leadership and US domestic policy makers will also need to be built and strengthened to encourage a strong agreement in 2009.
A clear and decisive commitment by the Federal Government to emission reductions at home would also help build the confidence and willingness of others to take comparable actions, and provide greater credibility and leverage in mobilising international action to reduce emissions.
It is particularly important for the Rudd Government to build trust and confidence among developing countries and key trading partners like China and India.
An associated benefit is that Australia may find it easier to pursue other climate change policy objectives, such as the treatment of emissions intensive traded goods. Rapid early reductions would help manage the economic risks to Australia from uncertainty in the pace of global action. It is much more difficult and costly to accelerate emissions reductions than to decelerate them in response to changing international circumstances. In particular, incremental tightening of long-term emission targets risks the premature retirement of emissions intensive capital assets, such as traditional coal-fired power stations.
One of the world’s leading experts on the global carbon cycle, Dr Michael Raupacha of the CSIRO, recently stated that “a global greenhouse gas mitigation strategy is essential for Australia’s long-term national interest.” Recent drought has highlighted the nation’s vulnerability to climate change and securing an effective global agreement in Copenhagen has already emerged as a key diplomatic challenge for the new Federal Government. Setting the bar high domestically by implementing a strong emission reduction target is an important step on this path, no less than securing strong commitments from a new US Administration.
Erwin Jackson is the Director of Policy and Research at The Climate Institute