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Tag Archives: Emissions Trading Scheme

Australia’s $234 billion climate gamble

By Dr Anthony Horton

As of last year, China and the US were first and third on the list of Australia’s trading partners. Australian trade with China was worth $152.53 billion-a total that has grown by 12.2% on average over the last 5 years. Australia’s trade with the US was worth $60.43 billion as of 2014, having grown 4% on average over the last 5 years.

In March this year, China raised a number of concerns regarding Australia’s Intended Nationally Determined Commitment (INDC) for greenhouse gas emissions in the lead up to the Paris Climate Summit in December. In particular, they queried whether replacing the planned Emissions Trading Scheme (ETS) and the Carbon Farming Initiative (CFI) with the Emissions Reduction Fund (ERF) will yield the reductions that were likely under those two. The US also queried whether the ERF will primarily replace the ETS or whether other Policies and Measures will be considered.

I discussed a number of issues regarding the ERF (the Flagship of the Australian Government Direct Action plan) and the first Auction in April this year in an earlier blog. The second Auction will be held on 4 and 5 November, which is approximately three and a half weeks prior to the Paris Summit. It is possible that news of the second Auction results will spread as widely and quickly as for the first, including to representatives of other nations attending the Summit. The representatives may be keen to quiz the Australian party on the results, particularly if the results are questioned as extensively in social media as the results of the first Auction were. This will be very interesting to watch indeed.

In the time since the first Auction, it is fair to say that a lot has transpired politically in an international and domestic context that highlights and brings into focus Australia’s stance on emissions reductions. In an international context, China and the US have progressed a deal on emissions reductions reached last November with discussions earlier this month, as a result of which many cities including Atlanta, Houston, New York, Beijing, Guangzhou and Zhenjiang have pledged new actions. A number of other nations have announced their INDCs in the lead up to Paris.

Last Friday (US time) Chinese President Xi Jinping announced a nationwide cap and trade emissions program as part of efforts to tackle climate change. Cap and trade programs cap the total emissions and sources including power stations and factories purchase and sell credits. In terms of the US, although plans for a nationwide cap and trade program were defeated in 2009, California and other north-eastern states have implemented emissions trading schemes.

Domestically, the Government has changed leadership resulting in the installation of Malcolm Turnbull as Prime Minister. Last week, in response to the announcement of China’s cap and trade program, Environment Minister Greg Hunt announced that the Government will stay the course regarding the ERF which is reported to be “the best, most effective scheme in the world”.

According to the Government, further reductions could be considered in 2017/18 as part of discussions on Australia’s 2030 target policy framework.

Given that China and the US (amongst others) have raised concerns with Australia’s commitment for Paris and have signed agreements to peak and reduce emissions respectively, I would be very surprised if they (and other nations attending the Paris Summit) would be prepared to give Australia until 2017/18 to consider further emissions reductions. I think it more likely that the US and China lead the charge in maintaining pressure on Australia to do more in the global challenge that is climate change.

Given the recent announcements by the Australian Government with respect to the state of the domestic economy and the discussions as to the exact nature of the problem, I struggle to fathom why they believe they can maintain one particular strategy and direction with respect to emissions reduction when an increasing number of countries are going in another.

If trade with China and the US continues on their current respective trajectories, by 2017, the combined figure is at approximately $233.7 billion (at a minimum)-$170.84 billion from China and $62.85 billion from the US. I don’t know if many Australians would be prepared to allow their Government to gamble such a figure on any matter-least of all emissions reduction specifically but climate change more generally, especially given the global nature of today’s economy. This is effectively what they are doing by continuing to ignore the rising tide of emissions trading.

This article was originally published on The Climate Change Guy.

rWdMeee6_peAbout the author: Anthony Horton holds a PhD in Environmental Science, a Bachelor of Environmental Science with Honours and a Diploma of Carbon Management. He has a track record of delivering customised solutions in Academia, Government, the Mining Industry and Consulting based on the latest wisdom and his scientific background and experience in Climate/Atmospheric Science and Air Quality. Anthony’s work has been published in internationally recognised scientific journals and presented at international and national conferences, and he is currently on the Editorial Board of the Journal Nature Environment and Pollution Technology. Anthony also blogs on his own site, The Climate Change Guy.

 

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Could they?

Next week, the 19th session of the Conference of the Parties to the UNFCCC and the 9th session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol will be held in Warsaw. These sessions are a continuation of the process that included the important and internationally accepted Kyoto Treaty, and are building towards a final meeting with the intention of creating a binding, internationally agreed treaty on climate change mitigation, in 2015.

Not entirely surprisingly, the Abbott Coalition government will not be sending a Minister nor a senior representative. This omission is regarded as “highly unusual“, but from a government openly skeptical of the human impact on climate change (or the very existence of it) and hostile to most accepted forms of responding to it, it can perhaps be understood. It is disturbingly ironic that the Environment Minister, Greg Hunt, will instead be in Parliament trying to dismantle Australia’s world-leading attempt at carbon abatement through an emissions trading scheme whilst his international counterparts will be at a global conference discussing ways to implement exactly this kind of scheme.

More disturbingly, the government has cancelled consultations which were already planned with domestic business representatives and foreign diplomats to brief them on Australia’s stance at the talks. These consultations are traditionally held in advance of this annual meeting and some have suggested that their cancellation indicates rifts and disagreements within the Abbott government about the appropriate approach. But a more sinister possibility exists.

It is certainly possible that the meetings were cancelled because Australia effectively has no stance on the climate talks to offer; that the Cabinet is not united, the Abbott government has not had sufficient time to formulate an approach, and to engage in these consultations would reveal the extent of the disagreements. It’s also possible that the Abbott government thinks that climate change discussions are such a waste of time that the cancellation of these meetings is a cost-saving measure. But these are not the only possible explanations.

Whichever way the talks go, and whatever you think of anthropogenic climate change, Australia stands to lose, and lose big.

  • If climate change is real and goes unmitigated, we’re amongst the biggest losers in terms of environmental impact, with effects on health, productivity, real estate and loss of food security.
  • If climate change is not real but enforceable limits come into place, Australia’s biggest competitive advantage in the world – and pretty much the only one that matters under a Coalition government – is badly devalued. It’s known as a carbon bubble and the effects on Australia would be severe. If Australia can find no buyers for her coal, oil and gas, or the terms of trade for these resources decline, then Australia’s GDP goes through the floor. Cue huge unemployment, recession, social unrest – and if Australia failed to succeed in heroic efforts to retool for a new economy, failed state status would not be out of the question.

There are thus three major policy positions available.

  • If you don’t believe in climate change, the only position with integrity is to frustrate the creation of any kind of global, binding emissions standards. The imposition of these standards would needlessly and critically damage the Australian economy, and the Coalition is tying Australia ever more closely to the success of its carboniferous export markets.
  • If you are agnostic on climate change, the pragmatic position, of greatest benefit to a political party right now, is to frustrate global standards. In this way you can defer the negative impacts of binding emissions standards and the end of the carbon bubble, at least for a while. Hopefully, at least while you remain in power.
  • If you are a believer in climate change, the only position with integrity is to support and promote global standards, which will have significant economic consequences for Australia. The resultant devaluing of the big mining companies will mean foregoing a huge volume of tax and royalty revenue. It will require a significant effort at retooling the economy to support renewable energy, with increased research and development, funds being given to climate projects, and governmental support and backing for mechanisms to reduce carbon outputs without crippling the economy. In other words, much of the infrastructure that makes up Labor’s ETS legislation, that Greg Hunt will be trying to dismantle starting next week.

The Coalition has an overall tendency towards climate change denial, and an overwhelming amount of political pragmatism. Could they be planning to vote no; to do everything possible to sabotage international agreement on the topic of standards?

It can only be to the Coalition’s benefit to frustrate global agreement on carbon standards. Successful adoption of binding standards has the following effects:

  • The Coalition’s stance appears increasingly out of step with the rest of the world;
  • Other countries divest from oil, coal & gas, with the aforementioned economic impacts on Australia;
  • Other countries benefit from their own huge investments in solar/renewables, that the Coalition has turned its back on or repealed; and
  • The importance of the global emissions trading market burgeons, just as the Coalition may well be successful (particularly after July 2014) in deconstructing Australia’s own stake in the game.

On the other hand, continued global disagreement has the following outcomes of benefit to the Coalition:

  • Support is provided to the standard political excuses: “The science isn’t settled”, “The argument’s not over”, and “We’re awaiting consensus.”
  • A temporary delay may be achieved in the collapse of the fossil fuel market. This provides the government of the day more time to dig up and sell the fossil fuel resources Australia is so rich in, while we still can.

If the Coalition truly disbelieves in climate change, or man’s contribution to it, then if it is to be true to itself, it will mandate policies that frustrate the efforts of meetings such as Warsaw, November 2013. In so doing, it is going to be actively destroying the future of the planet; furthermore, it is currently lying to the Australian people whenever it talks about Direct Action and carbon emissions targets it doesn’t see as relevant. To readers of this blog, this is no revelation at all.

If the Coalition isn’t sure about climate change and is simply being pragmatic, in addition to destroying the future, they are more culpable: they are deliberately risking the future for the sake of their own political present.

And if, contrary to many peoples’ beliefs, the Coalition actually believes in climate change, but still acts to frustrate consensus for its own political gain, knowing the effects it will have on generations yet to come, then that would be the most evil of all.

 

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