Published article

Climate action needs technology

January 2006

Will the cost of technology and transition see us again defer meaningful action to combat climate change? Or will wiser heads prevail?

It is to be hoped that next week's ministerial meeting of the Asia Pacific Clean Development and Climate Partnership in Sydney will provide some tangible ways forward to tackle climate change. The six countries who formed the partnership - Australia, China, India, Japan, Korea and the USA, are taking a technology approach to the challenge ahead.

Certainly technology has to play a crucial role if we are to avoid crossing a 2 degree centigrade rise in average global temperature which scientists see as a threshold beyond which all bets of maintaining a functioning planet are off. As carbon remains in the atmosphere for approximately 80 years, time is of the essence to find ways to conserve energy, reduce emissions and stabilise atmospheric carbon levels. At the UN conference on climate change, held last month in Montreal, there was an unprecedented and palpable acknowledgement of the foreseeable deep vulnerability that faces us.

Historical imperatives have to give way to a new order of thinking, planning and acting. It has been suggested that the type of cuts in GHG emissions that are required are in the order of 60% by 2050 and 80% or more by the end of the century. Even with massive deployment of new technology this is an extremely tough call given that energy demand is predicted to rise by 70% by 2030 under a business as usual scenario. It is an exceptionally tough call for developing countries where over 1.5 billion people are still without electricity or the basic survival services of clean drinking water and sanitation that electricity can help to provide. But, without action to combat climate change the situation in many of the least developed nations will worsen, not improve. Climate change is one of the most important development challenges especially for countries which rely on one or two basic agricultural commodities. Water shortages, rising sea levels and salt contamination of groundwater and arable land would impact the livelihoods of millions of people leading to mass migrations and seriously disrupting trade and the global economy.

The cost of tackling climate change should not be underestimated but it must not be used as an argument to defer action to some more preferential time in the future which doesn't interfere with near-term market or political cycles. The cost of not overcoming climate change hardly bears thinking about. What would be the costs and implications of atrophy of our fundamental asset base? What would happen if our planet could no longer deliver sufficient services to meet demand? Clean and abundant drinking water, productive soils, crop fertilisation, fish stocks, or fresh air have been taken for granted by all of us but they are already being hit hard by the collateral damage of climate change.

There are of course other important questions such as "What are the costs of energy security?" Or, "What are the costs of corporate liability for companies who don't act to curb emissions and knowingly contribute to the emphysema of the future?"

Industry's wealth generation and innovation is fundamental to developing the technology that will be necessary to tackle climate change. But for technology to be effectively deployed an over-arching and enabling framework is needed and, realistically, only governments can control the powerful tools and levers capable of reducing risk and maintaining the asset of the global commons.

The concept of an enabling framework would include using the taxation system to reward what is in the national interest and to penalise what harms it. This in turn would be reinforced by regulation setting clear performance standards and providing the surety of a legal framework to support high performers' equity in transition to a carbon-constrained future.

Even without climate change there are security and resource limitation imperatives to develop cleaner and more efficient energy sources. Decisions made today are not just about the initial capital expenditure cost - there are significant cost reductions that can be achieved in long-term operating costs by increasing efficiency (yet research by Sydney company Energetics has shown that only 15% of companies are taking advantage of energy efficiency measures).

There are immense savings to be made to the public purse by curtailing the negative externalities associated with current productivity. Why should the taxpayer be saddled with the costs of the goods and services that the consumer does not want to pay full price for?

Economic instruments have a key role in this framework approach. A carbon price signal with an internationally linked emissions trading system would facilitate both the supply and demand sides of the market being able to take immediate advantage of investment into emissions reduction technology. Emissions trading also brings into play other ways of abating, mitigating or offsetting emissions and this would allow Australia to take better advantage of forestry carbon sinks. Trading could additionally provide a reward system for farm stewardship of biodiversity or for not clearing land.

Another powerful tool that governments could use far more effectively is their direct procurement and investment funds. While at this early stage the energy technology focus of the 'Group of 6' appears to be on stationary energy, there are significant gains in GHG emissions reductions to be made in the transportation (approximately 20% of global emissions) and the household and commercial sectors (approx. 24% of global emissions) and these could provide important new manufacturing and employment opportunities. As an example in Australia and the USA, a purchase or lease program throughout the three levels of government mandating that all fleet vehicles have to meet benchmark fuel efficiency and low emissions standards would give a significant impetus to automotive companies to retool production plants. The size of the government fleet market would effectively allow for lower unit cost of vehicles for consumers, while creating a supply of highly efficient vehicles for the second-hand market. Combine this with lower air pollution and opportunities for export of clean vehicles into China and India in particular, and the taxpayer dollar is being used very effectively.

Australian leadership in climate change is vital if we are to keep our options and our opportunities open. Technology success in this energy intensive country could rapidly translate to a massive export opportunity in assisting developing countries reducing their carbon footprint.