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Opening address—Asia Climate Change Forum

Dr Martin Parkinson
Secretary, Department of Climate Change and Energy Efficiency

Asia Climate Change Forum
Australian National University
27 October 2010

Thank you for inviting me to open the Asia Climate Change Forum, convened by:

• the South Asia Bureau for Economic Research (SABER),
• the East Asia Bureau of Economic Research (EABER), and
• the Crawford School of Economics and Government of the Australian National University (ANU).

This Forum is being held almost a year on from Copenhagen and only a month out from Cancun, the 16th and 17th meetings of the Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC).

Ross Garnaut, who will speak later today, famously described climate change as a "diabolical policy problem" and mused openly about whether our political processes are up to the challenge of responding [1]. He was right.

Well before Copenhagen, the international system was undergoing an unprecedented transformation — characterized by the emerging economies becoming key players in shaping global economic governance.

Copenhagen arguably represented the first real attempt by a transforming world to manage the 'global commons' – problems that affect each person on the planet but are the responsibility of no individual country.

Copenhagen reinforced to me the importance of a 'flexible geometry' in responding to climate change – that is, the need to work multilaterally, plurilaterally and bilaterally to build confidence and to find areas of common ground.

Stimulating and sustaining progress will require us to identify tangible building blocks, and celebrate early successes as components of an evolving, but incomplete, 'solution'. As the Shergold Report concluded, global progress is more likely to emerge through an evolving 'bottom up' patchwork of actions by individual countries and groups of countries.

Such an approach needs support from a robust, analytically based, policy relevant second track dialogue of the sort we will have here today.

This is not to abandon the UNFCCC – to the contrary, it is to recognise realistically what we can ask of it, and to acknowledge we need to reinforce action within it by complimentary action elsewhere.

Consider, first, the facts about Copenhagen.

With the benefit of distance, most commentators and participants have been more upbeat about the outcomes from Copenhagen than at the time.

The Copenhagen Accord represents a significant advance on the Kyoto Protocol framework.

To date, 139 countries – including 99 developing countries – have expressed their support for the Accord. Over 80 countries have targets or nationally appropriate mitigation actions in the Accord’s appendices, representing coverage of around 80 per cent of global emissions and around 90 per cent of the global economy. It is a significant advance on the coverage of the Kyoto Protocol.

In examining the pledges in the Accord, two issues are striking;

1. The gap between what developing countries are prepared to inscribe internationally (and be held to account for) and the actions they are taking domestically; and
2. Even noting the pledges inscribed, the peculiarly Australian conceit that no action is being taken elsewhere in the world.

We 'get' that countries may not wish to 'over commit' internationally if they have doubts about their domestic capacity to deliver, but the sheer magnitude of the gap is surprising to me. If countries are really doing what have committed to domestically, the pledges in the Accord are conservative and thus the current global effort is much greater than we see on paper.

To help get around this, it will be important to have a sense of what each nation is actually doing and, if possible, to develop effective shadow carbon prices to allow comparisons of action.

As I speak, I will move through, but not speak to, slides showing some of the action underway in a few regional economies.

Clearly, it is hard to compare across countries, but just a recitation of commitments puts the sword to the claim no one else is acting.

Developing methods that allow comparisons of action while recognising differentiated responsibilities and respective capabilities will be an important next step.

The Australian Government has committed to the establishment of an expert group to examine effective carbon prices in key nations. How this might best be done is currently subject to discussion.

The first attempt that I am aware of to develop shadow carbon prices has, however, recently been released.

Vivid Economics, on behalf of the Climate Institute, recently completed a study on the electricity sector of a key group of countries. While the methodology in this area will likely evolve and be refined, Vivid and the Climate Institute are to be congratulated for attempting to quantify the implicit carbon price imposed by policies to reduce emissions in countries including China, Japan, the US, UK, South Korea, and Australia.

The results indicate implicit carbon prices, in USD purchasing power parity terms, ranging from over $29 in the UK to less than $1 in Korea, with Australia at $1.68, China at $14.22 and the US at around $5.

The results of this study show clearly that the majority of the countries studied have policies in place that are imposing some degree of carbon constraint on their electricity sectors - any country considering further action at the current time will not be 'acting alone'. It also shows the increasing disparity between countries that have started implementing ambitious domestic policies and those that have not.

So where does this leave Australia and how does it influence what we want to see from Cancun?

For a start, we must stop hiding behind the evident untruth that no-one else is acting on climate change.

Other countries are acting and capitalising on "early mover" opportunities that are available now. Countries such as China and India – which have a fraction of our wealth per capita – are moving into the clean technology market without the "carrot and stick" approach of a global treaty.

There is a case for Australia to do likewise.

So how must Australia address climate change?

Without further action, Australia’s emissions are projected to continue to rise, reaching 121% of 2000 levels by 2020, so our unilateral target of 5% below 2000 levels (4% below 1990) is equivalent to reducing Australia’s emissions by 144 Mt in 2020. In per capita terms, this is a reduction of around one third relative to 1990. Action at the upper end of our target range – 25 per cent below 2000 levels, 24 per cent relative to 1990 – would require a reduction of 250 Mt, or almost halving our 1990 per capita emissions in the next ten years.

The Minister for Climate Change and Energy Efficiency, the Hon Greg Combet MP, recently set out priorities for the Government’s domestic climate change mitigation policy. These are built around three elements.

i)   Clean energy

First, on clean energy, the Government has established a 20 per cent Renewable Energy Target (RET). The RET will drive around $16 billion of investment in renewable energy generation by 2020.

The RET is complemented by the $5.1 billion Clean Energy Initiative, supporting the research, development and demonstration of low emission technologies.

ii)   Energy efficiency

The Government’s second key plank of action promotes energy efficiency by businesses and households. While we have been working in the energy efficiency space for some time, most recently with the Energy Efficiency Trust, managed by the Australian Carbon Trust, which promotes energy efficiency in the business sector, it is clear there is much more we can do. The recent report of the Prime Minister’s Task Group on Energy Efficiency has shown we lag behind our key competitors and comparable countries on energy efficiency and we need to improve if we are to stay competitive. It identifies five foundation measures which could contribute to a step change improvement in Australia’s energy efficiency performance:

• A national energy efficiency target;
• A national energy savings initiative;
• An improved governance structure;
• Improved innovation, data and analysis; and,
• A long-term strategy to build a culture of energy efficiency

iii)   Carbon Price

The third part of the Government’s approach involves the introduction of a carbon price. There are several ways of creating a carbon price. The two broad options are a carbon tax or an emissions trading scheme. There are also 'hybrid' options that combine features of both.

Regardless of the mechanism, it is the price on carbon that is central to transforming our economy. It is the carbon price that creates a commercial incentive to find better, cleaner ways of producing goods and services.

We need to put in place the carbon price incentives that will begin our economic transformation, so that as the international situation evolves, Australia’s economy is not left behind. The priority now is to agree on carbon pricing arrangements that are achievable, economically responsible and fair.

The Road to Cancun

The challenge for the international community in developing an effective and sustainable response to climate change is to recognise that the choice and implementation of effective mitigation actions for every country is strongly dependent on their national circumstances. The most successful mitigation schemes are those that resonate within their cultures, and have the support of their citizens.

The comparatively modest outcomes many countries are expecting from Cancun reflect a greater awareness in the international community of the essential link between domestic action and international ambition.

As such, it will be important not to invest the Cancun meeting with expectations it cannot meet.

We need to be realistic, but continue to push ahead. At a minimum, we should look to an outcome that balances progress across and within each of the key elements of the Copenhagen Accord: mitigation; measurement, reporting and verification (MRV), or international consultation and analysis as developing countries refer to it; adaptation; technology; finance; and REDD+.

Conclusion

Global efforts to transition to a low carbon future are already underway.

The concomitant rise of carbon markets is inevitable: there is an economic logic in using market mechanisms to meet ambitious emissions reductions goals, and a real political logic that a focus on goals inevitably pushes countries and the world to measures that reliably control quantities.

Climate change is a multidisciplinary challenge, with broad ranging environmental, social, and economic effects, all of which need careful consideration.

The challenge is on the table, and I encourage forums such as the Asia Climate Change Policy Forum to bring analysis and ideas to bear so that, together, our nations can rise to this challenge.

Thank you.

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Ross Garnaut (2008) (Garnaut Review Final Report, p xviii; and A Diabolical Policy Problem: Securing International Agreement, Paper presented at the Festival of Ideas, Melbourne, 16th June 2009