Dec 10, 2010 - 3:43pm
This article was originally published in ClimateSpectator on December 10, 2010.
By Will McGoldrick, Policy & Research Manager, The Climate Institute
As delegates bunker down for the final hours of intense negotiations in Cancun, observers are left to speculate on what the final outcome may mean for national efforts to reduce pollution and drive clean energy investments.
While the global rules being debated in Cancun are crucially important, they are only part of the story. For Australia, what really matters is what is happening on the ground, and the economic risks and opportunities this brings.
Domestic climate change policies are driving an unprecedented level of investment in clean energy, with a record $US154 billion tipped to be invested in renewable energy around the globe in 2010.
This is not just limited to advanced economies. In 2009, China overtook the US, recording the world’s largest investment in clean energy – $US35 billion, almost twice as much as was invested in the US. Clean energy markets in other countries in our region are also growing rapidly. In South Korea, for example, the government has announced that around $34 billion will be invested in renewable energy by 2015, up from around $0.3 billion in 2009.
This global boom in clean energy and low pollution technology is happening, in spite of the seemingly slow progress in the UN climate talks. It is the direct result of national and sub-national policies aimed at reducing pollution and stimulating investment in clean energy. In Cancun, countries have made it clear they have no intention of backing away from these domestic actions.
So what does all of this mean for Australia?
First and foremost, Australia needs a limit and price on pollution to reduce our dependence on polluting technologies and unleash our clean energy potential. Australia has some of the world’s best renewable energy resources and an impressive track record in clean technology research and development. There is no reason why we cannot be joining others in gaining the first mover economic advantages in this rapidly growing market. Without the right policies in place – in particular, a pollution price – investors simply will not put their money in Australia’s clean energy and low pollution sectors.
A pollution pricing mechanism incapable of meeting the full range of Australia’s international pollution targets would have serious budget implications for the government. If parliament puts in place pricing mechanism designed only to achieve the five per cent target, but agrees to a 15 or 25 per cent target internationally at a later date, the government would need to purchase international carbon credits to make up the shortfall. Analysis by The Climate Institute estimates the cost of meeting this shortfall could swell to $17.9 billion by 2020.
The introduction of a national pollution price next year will also be a test for Australia’s credibility within the UN negotiations. The pollution pricing mechanism must be capable of delivering the full range of Australia’s pollution reduction promise. A pricing mechanism that can realistically deliver the 25 per cent target is the most important thing Australia can do influence the global negotiations. A pricing mechanism that locks in five per cent, or less, would substantially weaken Australia’s hand at the negotiating table and send a message that Australia is not serious about its own national interest.
While countries are still negotiating the details, there is some optimism that Cancun can deliver a number of important steps forward. For example, countries are very close to agreement on establishing a new global climate fund to help mobilise $US100 billion a year by 2020 to support low pollution economic development, protect tropical forests and help the world’s most vulnerable people build their resilience to escalating climate change impacts.
While the outcome of Cancun will set in place ongoing international processes to build trust and cooperation among countries, Australia’s economic prosperity in the low pollution economy rests in the hands of our leaders in Canberra. A pollution price as part of a comprehensive plan to reduce our economic dependence on pollution is the best way to ensure we are not lumbered by the economic and social costs of further delay.