Mar 20, 2012 - 8:00am
This was originally published in The Australian on Tuesday 20 March 2012. Tim Wilson of the IPA published an opinion piece in The Australian the same day with numerous criticisms of the report. The Climate Institute's reaction can be found in a letter that was subsequently submitted to The Australian here.
By John Connor, CEO, The Climate Institute
In late 2010 BHP Billiton chief executive Marius Kloppers famously said: "To remain competitive in a future carbonconstrained world, Australia will need to turn into a lower-carbon economy."
That job only got harder since 1995, according to the Climate Institute/ GE 2012 Carbon Competitiveness Index released yesterday.
Australia is the only G20 country that has gone backwards on its low-carbon competitiveness since 1995 and is ranked 16th.
This 2012 update of our 2009 index looks at each country's readiness for, and ability to prosper in, a carbon constrained world. It examines economic structure, the extent of early preparation and indicators of future prosperity such as investment in education and infrastructure.
Although partly obscured by a wall of white noise of short-term political and economic instability, last year ended with important domestic and international achievements.
Achievements, such as Australia's Clean Energy Future package and the UN's Durban Platform, represented real progress among growing global carbon markets and clean energy investments.
Last year was another record year for clean energy investments, which grew to $US260 billion ($245bn). For the first time since 2008, the US was the global leader in terms of total investment in clean energy: $US56bn. China maintained its strong position, with investment rising to $US47bn. India's investment grew the fastest with an increase last year of 52 per cent to a total of $USIObn. Data from Bloomberg New Energy Finance shows that clean energy investments now match fossil fuel investments.
With the CSIRO reporting that we have the highest greenhouse gases for 800,000 years, these investments need to urgently grow but their trajectory is unstoppable.
Unfortunately, in the emerging reality of a carbon-constrained world, Australia risks losing the lucky country tag.
What we have seen as the economic blessings of the past, such as cheap but heavily polluting energy, will soon become the economic curses of the future.
Relative to other G20 countries, Australia has the lowest level of overall clean energy production, the second highest number of cars per capita, and relatively high deforestation and emissions per capita from the transport sector.
Lower than average investments in infrastructure and declining expenditure on education also affect our ranking.
The recently legislated Clean Energy Future package is a step towards joining lead ranking nations such as France, Britain, Germany, South Korea and Japan or the biggest movers since 1995 such as Mexico and China.
But it will take further leadership from Australian business, politics and the community to turn the advantages of today into the good fortune and prosperity of tomorrow.
Business and institutional investors will need to step up to the risks and opportunities. Additional government policies on energy efficiency, risk disclosure and clean energy will matter.
It is also clear that the countries that are best prepared for the lowcarbon economy are those that are recognising the inextricable link between economic, resource security and/or climate change policies and are taking action accordingly.
More than 100 nations have policies supporting the development of renewable energy or carbon pricing. Carbon taxes and direct prices are already legislated in countries covering about 567 million people and a further 900 million will be covered when schemes begin in China and South Korea by 2015.
While the European Union carbon market deals with oversupply issues and broader economic woes, Australia's starting carbon price of $23 is by no means the world's highest price. Britain's announced floor price is at similar levels and other countries such as Norway, Switzerland and Sweden have higher prices.
It's important to remember that under the transitional arrangements, free permits to tradeexposed companies mean their real price is in the order of $1 to $8 and the revenue raised from the Australian scheme is providing other assistance to energy efficiency, clean energy investments and Australian industries and households.
It is also important to remember that the Australian legislation creates not just a carbon tax but a carbon tap. A pollution tap that in three years will start turning off at least 12 million tonnes of carbon pollution impact a year.
To reflect existing global action and help boost global ambition towards our national interest in a safer climate we'll need greater action. Stronger reductions, new Kyoto commitments, creative linkages of our market with others and a more strategic climate diplomacy all need focus.
For all the relative strength of the Australian economy, we are not immune to global trends. We are reminded of this every day by news reports about the impact of the mining boom and global economic conditions on our exchange rates and our economy.
As one of the developed countries most exposed to climate change, Australia is faced with dual challenges of competitiveness and co-operation. We need to shrug off the competitiveness constraints of our highcarbon economy and lift our cooperation with other nations. We now have the tools, we have the skills, but do we have the character for these challenges?
John Connor was CEO of The Climate Institute from 2007 to March 2017. Whilst qualified as a lawyer, John has spent over twenty years working in a variety of policy and advocacy roles with organisations including World Vision, Make Poverty History, the Australian Conservation Foundation and the NSW Nature Conservation Council. Since joining The Climate Institute in 2007 John has been a leading analyst and commentator on the rollercoaster that has been Australia’s domestic and international carbon policy and overseen the Institute’s additional focus on institutional investors and climate risk. John has also worked on numerous government and business advisory panels.