Published article

Huge opportunities ahead in making our economy smarter, more efficient and greener

March 2007

"Removing waste, pollution, and greenhouse gas emissions and providing greater energy productivity is one of the best opportunities for wealth generation and wealth preservation that the world has ever seen." I said something similar at a conference in British Columbia, Canada, over 15 years ago and - slowly - we seem to be edging towards making it a self-fulfilling prophecy.

British Columbia springs to mind because Premier Gordon Campbell, whom I ran against in the by-election for his inaugural seat in 1994 - is now teaming up with California State Governor, Arnold Shwarzenneger, to put in place some major steps to tackle climate change. I mention this not because I lost a by-election (which was a foregone conclusion) but because it was a rare opportunity for live TV debate about the scale and relevance of environmental issues and the solutions that were available. Suffice to say that my opponent was not, at that time, in the least bit enamoured of policies to meld benefits for the environment and the economy. So time can change perspectives and action. The difference today is that we are, in my view, fast running out of time to enact change of sufficient measure.

Certainly, the private sector's innovation in technology, infrastructure, operating systems and financing is making giant strides but we still need governments to use their powerful tools and levers more effectively in order to plan and design the strategy for an 'enabling framework' that will weave new and more efficient approaches into the market - while at the same time weaving out the technologies and thinking that have reached their 'sell by' date. This is how Australia's next competitive edge will be developed.

Regulation, standards, education, market instruments, internalisation of externalities all need to play their role and only governments are in a position to choose if this will happen or not. In Australia historical imperatives still dominate policy making - any grand strategy for transition has to overcome decades of artificially deflated costs for electricity and water, as well as the fear-mongering that companies would flee off-shore to more lax environmental regimes if full cost recovery pricing were introduced. I do not believe that a carbon price will see any significant relocation of companies overseas because companies with a reputation to protect are unlikely to seek a 'licence to pollute' from their investors, bankers, insurers and shareholders which would see them abandon sunk assets (and good resource bases) in a politically and economically stable country, that has skilled personnel and good infrastructure, in order to relocate to a regime offering, at best, a temporary respite from a shadow cost of carbon.

Conversely, there is a drift of low emissions technologies, businesses and investment from Australia to countries with international greenhouse abatement and pricing mechanisms - if this continues it will cost Australia far more than the protection of out-dated, greenhouse emitting energy can repay. The lack of certainty about carbon pricing is costing Australia current and future loss of investment and reputation.

A 'green budget' that plans for investment in environmental infrastructure is key to creating the blueprint for a sustainability, energy and climate change strategy that will drive Australia's future prosperity. This is not just about tackling climate change, it is about the core 'smarts' for the next generation of industry. And I believe that much of this environmental infrastructure can be replicated in developing countries - exactly what institutional investors, bankers, insurers, major retailers and corporations, scientists and economists are looking for.

Certainly for Australia Asia holds the key to a marketplace of sufficient scope and scale for emerging technologies and systems. That is why EBA has cited the potential for an APEC+India carbon emissions trading scheme, especially as it builds on the AP6 technology approach (which itself is now calling for market instruments to help commercialise and deploy technologies)

Energy management company Energetics believe that Australia can achieve between 2% and 2.5% per annum compound improvement in emissions reduction and that this can be sustained into the long-term. This would result in 22-28% emissions reductions in 10 years and 35+% (over business as usual) within 15 years through energy efficiency improvements alone. However, Energetics emphasise that emissions trading needs a strong regulatory framework, and fiscal incentives working alongside in order to achieve this outcome.

In addition to Australia's many forestation and biofuel projects capable of supplying carbon offsets, a new approach has seen Australian companies Global Renewables and Lend Lease awarded with a $5 billion contract in the UK. They will build and operate a state-of-the-art waste management project to recycle materials and embodied energy, methane and soil carbon from the waste stream. Global Renewables' Chairman, Dr John White, estimates this approach can reduce GHG emissions by between 7% and 10% per annum, generating significant carbon credits in the process. An additional benefit of this massive recycling project is that natural fertiliser, a by-product of the putrescible waste stream, can help farmers revitalise soils while giving them an opportunity to become carbon traders.