Starting the Global Clean Investment Engine Media Release

Jun 16, 2008 - 6:09am

The last fortnight of climate talks in Bonn took place against the almost surreal backdrop of global petrol panic.  Images of marches, riots, trucking blockades and even fishing strikes tumbled across the screens and filled the newsprint columns.  For the bleak at heart this was proof of the difficulties we will have implementing a global greenhouse gas emissions control regime.

In reality these talks, and the 2009 deadline for agreement, represents a stroke of good fortune. A properly framed agreement can provide important tools and finance to deal with the astonishingly inept global policies that have subsidised fossil fuel dependency, ensured chronic underinvestment in energy infrastructure and exposed so many to energy price shocks. Taking advantage of this good fortune requires a broadening of the imagination of the task at hand - seeing the agreement as not only a pollution control agreement but also as a clean technology investment engine.

There are two sides to the climate coin that will buy us future prosperity and insurance against climate risks.  One side is the control of emissions. We’ll need commitments to 25 - 40 per cent reductions from 1990 emission levels from developed countries which as a group are responsible for around 75 per cent of the emissions in the atmosphere already causing trouble. And yes we’ll also need commitments to actions from developing countries which see their emissions peak and decline before 2020. 

There’s no way we’ll get commitments from developing countries unless developed countries show some bona fides both in terms of emission reduction targets but also in some of the other shiny side of the coin, investment.  Investments will be needed to help prepare developing countries for the impacts of climate change now already unavoidable but also to finance halting deforestation and ensuring the creation of clean, low carbon technology and infrastructure.  Though this will require hundreds of billions of dollars per year, the International Energy Agency and others put this into perspective – it represents just 1 to 2% of global GDP.  Achieving those sums is eminently achievable but will require policies to leverage public and private investment streams.

The Bonn talks were a weird mixture of hope and gloom. The first week raised hopes as a number of countries came forward with good ideas, particularly on this very question of investment.  Mexico, China, Brazil lined up with suggestions that involved rich and poor countries in raising finance.  Switzerland and Norway also came prepared, with the latter suggesting a proportion of countries agreed targets could be auctioned.  Here were ideas that started to rise to the scale of the response necessary.

However, in what can at best be described as a sign of serious intent from all parties, the second week saw the talks almost grind to a halt as old arguments, new obstructions and dodgy ways to cook the books, were introduced.   US comments that they were meeting their commitments were dismissed as the last quacks of a lame duck regime.  The Japanese PM’s “Fukuda vision” built on Canada’s obstructionism and obfuscation in creative accounting – shifting baselines and twisting figures to produce fig leaves over relative inaction.  At least the Fukuda vision indicated Japan is heading down the path towards the creation of a carbon price in the form of an emissions trading regime (tentative steps that recalled those of the Howard Government some eighteen months ago as it sought to emerge from policy paralysis). Even the European Union seemed radically underprepared for these talks.

There’s mounting anxiety about the pace of the talks and everyone, including the Australian delegation, called for greater speed and urgency.  The Australian Government has it’s first opportunity to demonstrate policy leadership in next month’s Emissions Trading Green Paper. Australia can help by signalling that it will do its fair share by dedicating a significant amount of its emissions trading revenue into ensuring developing countries build clean energy infrastructure and help prepare them for the impacts of unavoidable climate change. This investment priority should be reflected alongside other policy priorities of ensuring energy affordability for low income and affected households, and switching Australia’s economy to clean energy.

Such a signal would demonstrate intent to the August meeting in Accra.  By December’s Ministerial level meeting in Poznan, Penny Wong can cement Australia’s middle power leadership with this embedded in exposure legislation as well as, under the Government’s timetable, providing the first indication of the scope of our emissions reduction target.  And of course we now have a taxation review underway which can reverse perverse fossil fuel subsidies and incentivise clean energy investments.

It can’t just be about public finance.  We’ll need a fresh look at leveraging private investment.  The global agreement can help this by encouraging and ensuring reforms in both the developed and developing world that clarify intellectual property protections, wind back perverse subsidies and incentivise funds managers to invest in clean technology and infrastructure.  

All of this remains possible.  With constructive leadership we can build an investment engine that powers the world to a new level of clean energy and low carbon prosperity.  Rebuilding global infrastructure will be challenging.  But without a clear, and clean, vision of the future and demonstrable details of how we are to get there, the troubles on our streets and waterways can only be guaranteed to turn truly toxic.

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