Competition and retaliation of a low pollution economy Opinion Article

Dec 11, 2010 - 3:40pm

This was originally published on ABC The Drum.

By Erwin Jackson, Deputy CEO, The Climate Institute

As the Cancun Climate Summit heads into its final days a new world of climate diplomacy is taking shape both inside and outside the UN talks. It is becoming clear progress will only occur through a mix of cooperation, competition and retaliation.

The UN talks in Cancun represent one end of this extreme. Over the last two weeks countries have been attempting to cooperate to build on the political agreements made in Copenhagen and make UN decisions that formalise keys of the future global pollution limiting regime.

Good progress has been made on some issues but thorny political issues remain. Central to this is how strongly the existing targets from countries representing 80 per cent of global emissions will be linked to the formal UN system. This is a difficult issue politically as it is the first logical step towards a new legally binding treaty at some time in the future.

While cooperation to strengthen the global rules and mechanisms is crucial, in the short-term competitive instincts may play a more important role. Countries around the world - in particular China, the US and the EU - are driving multibillion-dollar investments in clean energy and low pollution technologies in order to dominate the global clean-energy economy. China saw over $US18 billion dollars in clean energy investment last year and dominated the global market. The UK, with a population only around three times that of us, saw $US11 billion in investment to Australia’s one billion.

Forward-looking countries and businesses are now seeking ways to gain early-mover economic advantages on reducing their economic dependence on pollution. Something that is often missed amidst the jargon and processes of UN meetings is the fact that these competitive instincts are currently driving most of the action to limit pollution and make clean energy cheaper in the real world.

There are early signs that competitive instincts may drive global action to the point of retaliation. Already in the EU and the USA the prospects of taxing imports from highly polluting countries has emerged in the public policy discourse. There is also a growing recognition that this option will be available to China as it continues to move ahead of countries like the USA and Australia in limiting pollution. China’s indirect pollution prices are already around three to eight times that of the USA and Australia respectively. China upped the ante yesterday, agreeing to anchor its ambitious Copenhagen commitments to limit pollution and drive clean energy investments into the UN framework.

One of the great ironies of global pollution politics has recently been the US Steel Workers Union petitioning the US government to undertake WTO action against China because its clean energy policies were disadvantaging clean energy industries in the US.

Given our highly polluting exports, Australia is particularly vulnerable to measures by other nations to level the trade playing field by ensuring their cleaner industries are not disadvantaged against more polluting ones.

Importantly, however, threats of retaliation actually provide strong incentives for countries to be more cooperative in the long run. Indeed countries are unlikely to want to get into lengthy and diplomatically difficult trade disputes. However, it also has the potential to undermine trust between nations and distract us from the problem at hand - avoiding dangerous climate change.

So, as Cancun heads into the end-game, let’s not forget Australia’s short-term priority. Without a domestic pollution limit and price Australia can’t cooperate fully as it cannot meet its international commitments. Without a domestic pollution price we will continues to be out-competed by countries dominating the emerging low pollution economy. Without a pollution price, we have no insurance against retaliation for our inadequate actions.


Erwin Jackson

Erwin is Deputy CEO of The Climate Institute. With nearly 20 years practical experience in climate change policy and research, Erwin has developed and led many national and international programs aimed at reducing greenhouse pollution. This work has been undertaken in Australia, Europe, North and South America, the Pacific and Antarctica. He has represented non-governmental groups and advised government and business in national, regional and international fora, including being a non-governmental expert reviewer of the reports of the UN’s Intergovernmental Panel on Climate Change. Erwin has written, researched and produced many publications on climate change and energy policy including a number of review papers in scientific journals such as the Medical Journal of Australia.
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