Economics Report: Climate leadership an affordable investment Media Release

Dec 02, 2007 - 7:03am

As this year’s most critical international climate change meeting begins in Bali today, The Climate Institute has released a comprehensive economic analysis that shows that Australia can afford to join leading countries in avoiding dangerous climate change.

“This report shows that decisive Australian leadership in cutting greenhouse pollution is affordable at home, a prudent investment in positioning Australia at the forefront of efforts to avoid dangerous global warming and avoids the economic risks associated with playing catch up in the emerging global clean energy economy,” said John Connor, Chief Executive of The Climate Institute.

The report by policy experts from CSIRO, The Climate Institute, Monash University and McLennan Magasanik Associates examined a range of scenarios to explore the relative costs of Australia free riding and following other industrialised countries in the global efforts to avoid dangerous climate change versus Australia taking a leadership position. This leadership position, illustrated by the country going carbon neutral by 2050.* The analysis didn’t factor in the climate change impact costs of inaction which The Stern Review have been estimated to be between 5-20% of global economic activity in 2100.

The report shows that if Australia reversed its rising pollution by 2012, reduced emissions by 20% by 2020 and became carbon neutral by 2050 that:

  • Australian economic activity is projected to increase from less than $1 trillion now to around $3 trillion by 2050. To 2050, the economy grows at 2.8% annually versus 2.9% annually with no action on climate change (i.e a 0.1% annual reduction in GDP growth).
  • Employment increases from 9.7 to 16.7 million jobs by 2050.
  • Long term impacts on energy prices and affordability are manageable with average energy consumer bundle (electricity, petrol and gas) falling from 6% of average income today to 4% by 2050. (While electricity, petrol and gas prices increase this is more than offset by increases in real income.)

The report concludes that, “making very substantial reductions in Australia’s net greenhouse emissions is affordable, and compatible with continuing growth in incomes, employment and living standards.”

Also that, “The key finding of this report is that the leadership premium associated with Australia committing early to very substantial cuts in our net greenhouse emissions is modest and affordable, and would help manage the economic risks to Australia as well as contributing to the global momentum and concrete actions required to avoid dangerous global climate change.”

“As the current drought illustrates, Australia is very vulnerable to the impacts of climate change and it is in Australia’s national interest to take a leadership position internationally by committing to domestic emission reductions consistent with avoiding a 2oC global warming.” said Mr Connor. “The bottom line is that this analysis indicates that leading the way on climate is an affordable, prudent and achievable investment.”



* Note to Editors: The report assumes that global action on climate change will continue to allow countries to use international emissions trading to meet domestic emission obligations. This allows Australia to become carbon neutral by undertaking emission reductions in Australia and investing in emission reductions in other countries to offset emissions such as those from our power stations and industries.

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