Wednesday, March 4, 2009

Climate change won't wait for recession's end

Kenneth Davidson
The Age, March 5, 2009

Delaying measures to reduce emissions is economically unsound.

THE unprecedented challenges of economic recession, global warming, peak oil and shortages of usable water have all emerged simultaneously.

The argument that the problems of recession and rising unemployment are more immediate and, therefore, measures to reduce the national carbon footprint should be put to one side, should be seen for what it is — special pleading by polluters who have apparently gulled a majority of Australian Industries Group members that it is also in their interests.

It is not. The bigger the delay in dealing with global warming, the bigger the cost of abating climate change — and the greater the danger that the world will have reached the tipping point where avoiding catastrophic change is impossible.

There can be no economy without an environment. There is no way that politicians can make decisions based on a compromise with the environment or the science on which global warming is based.

Politicians also cannot ignore the fact that the discovery and exploitation of new oilfields is now running well behind the growth consumption nor that climate change has, in the case of Victoria, led to a 20 per cent drop in rainfall and a 30 per cent increase in evaporation in the past decade.

It is true that global recession will slow down the growth in carbon emissions. It has already led to a temporary respite in the growth of new carbon dioxide emissions into the atmosphere. It is one of the reasons why the price of emission permits in Europe has recently collapsed.

But the overwhelming fact is that, even with a 0.8 degree increase in global warming since pre-industrial times, tipping points have already been reached. The Arctic and Antarctic are melting and scientists believe the Greenland ice sheet is already heading for total meltdown.

Thermal inertia, the fact that it takes up to a century for carbon dioxide put into the atmosphere to have its full climatic impact, means that there is a further 0.6 degrees of global warming in the pipeline, even if the world could agree on measures that would result in immediate carbon neutral growth.

In Victoria we are already seeing what 0.8 degrees of warming can do to the environment. A decade of drought is now being seen as evidence of climate change and this means that the probability of bushfires with the intensity of Black Saturday will increase.

These events have feedbacks into the carbon cycle with the release of carbon dioxide from the burnt vegetation, and have clear economic consequences for agriculture in Victoria.

The issues overlap. For instance, if we are to deal successfully with climate change and peak oil, it will require reduced emissions and a reduced dependence on oil.

In turn this will require fundamental changes to our cities, how we relate to the bush and the global economy.

The recession should be seen as an opportunity to accelerate investment in new technologies to reduce our carbon footprint and improve the quality of life without having to increase taxes or interest rates to "make way" for the new investments.

A study last year by international consultants McKinsey on the costs and potential of different options for reducing greenhouse gas emissions, firstly at a global level and then for specific countries including Britain, the US, Germany and Australia, found that the costs of reducing emissions by 2020 and 2030 were quite affordable, especially when compared with the growth in incomes over the period.

In the case of Australia, they showed that a 30 per cent emissions reduction below 1990 levels by 2020 and a 60 per cent reduction by 2030 could be achieved by developing technologies and energy efficiency measures costing $2.9 billion, or an average cost of $290 per household per year. This is based on a carbon tax of $65 a tonne.

The report points out that this cost compares with an expected increase in annual household income of more than $20,000 a year over the same period.

But importantly, the report states that "achieving significant emission reductions requires prompt action from government, business and consumers".

McKinsey points out the costs are gross. "We have not built in the likely cost of a 'do-nothing' scenario, such as the costs induced by a decline in agricultural production or the destruction of the Great Barrier Reef. Nor have we attempted to quantify anticipated value creation in the economy though the pursuit of new business activities.

"Opportunities involving lifestyle or behavioural shifts were out of scope not because they are undesirable, but because their costs or benefits are largely non-financial and thus difficult to quantify."

According to McKinsey, about 25 per cent of the emission reductions can be realised with positive returns. Most of these positive (or negative cost) opportunities are energy-efficiency measures related to improvements in buildings and appliances. Adopting the recommended measures would provide plenty of jobs and opportunities for Australian business.

Kenneth Davidson is a senior columnist.


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