Climate Change Policy Uncertainty Creates Risk for Australian Business Media Release

Aug 03, 2006 - 6:06am

Australian businesses face serious risks from climate change, ranging from physical risks, to litigation and poor investment decisions because of policy uncertainty, according to a new report released today by The Climate Institute.

Climate Change: Risks and Opportunities for Australian Business will be released this morning at a National business conference on climate change organised by the Committee for Economic Development of Australia (CEDA). The event is sponsored by The Climate Institute, Baker & McKenzie and Xstrata Coal.

“The report shows that climate change represents an enormous, yet under-appreciated risk to the Australian business community,” said Climate Institute Chief Executive, Corin Millais. “Regulatory uncertainty is one of the greatest risks, and doubts about the future direction of climate change policy and models for carbon pricing, impedes and delays optimal business decision making.”

“Without a nationally consistent policy, Australian business faces greater uncertainty over future climate policy and regulation than perhaps any other OECD country. This uncertainly is increasing as the debate on solving climate change intensifies.”

“Regulatory risk is particularly acute in the electricity sector where new infrastructure is needed to meet growing demand. A delay in new electricity infrastructure development has economy-wide implications as reliable electricity supply underpins the Australian economy.”

“With the risk of climate change also comes opportunity. Internationally, new multi-billion dollar markets in carbon trading and renewable energies are rapidly emerging. Together the global carbon and clean energy markets alone are worth in excess of $100 billion a year.”

“The international response to climate change is building momentum and a carbon constraint is Australia is inevitable,” Mr Millais said. “It’s essential that Australian business don’t get left behind compared to overseas businesses with greater experience in lower carbon economies. Climate change is creating winners and losers in the business world.”

“Establishing an early and internationally consistent carbon price in Australia would start reducing emissions and give businesses the certainty they need to be able to invest in the long term infrastructure which is required to maintain the competitiveness of Australia’s economy. It also gives business the chance to get early mover advantages in the booming global carbon trading market.”

In November this year, the Climate Institute released a five point plan to cost effectively drive Australia’s emissions down and not up. This plan includes the introduction of carbon pricing, national laws and timetable to reduce emissions and showing leadership international current talks on climate change.

 

SUMMARY

Climate Change: Risks and Opportunities for Australian Business

“The impact of climate change will be felt directly by investors – rising sea levels, droughts, floods and the possibility of sudden major climatic events – in terms of damage to agriculture, forestry, water and real estate, and the profitability of Australian markets and companies” Mercer Investment, consulting for the Australian Investor Group on Climate Change.

All sectors will be affected by climate change risks. These risks arise both from the physical impacts of climate change itself and the response to the issue of governments, investors, shareholders, competitors, customers, consumers, the public and the media.

Finance, property, insurance, agriculture, energy infrastructure, tourism and energy users are sectors likely to have the highest exposure.

Regulatory uncertainty is one of the greatest risks. Australian business face greater uncertainty over future climate policy and regulation than perhaps any other OECD country.

In capital-intensive industries, where turnover for replacing equipment can take decades and cost hundreds of millions of dollars, a lack of long-term regulatory certainty raises questions of sovereign risk to investments and stranded assets.

The lack of a nationally consistent regulatory framework to respond to climate change is driving various levels of governments to pursue different and changing policies, creating multiple compliance costs to businesses.

As the issue becomes of greater concern, governments are moving to introduce an even greater variety of initiatives, responses, inquiries, programmes, funding and R&D schemes.

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