Mar 06, 2015 - 4:30pm
This article first appeared in ABC's The Drum on 6 March, 2015.
Manager, Investment and Governance
National Policy & Research Manager, The Climate Institute
What is most important to safeguard for future generations of Australians? This week's Intergenerational Report seeks to answer this crucial question, but on one of the most important risk issues of the day, it fails.
A robust economy, good job opportunities, adequately funded services, and affordable housing are vital. Australians understand the discord and hardships caused when these elements of our society are strained.
Similarly, we are beginning to see how a future of rapid climate change will make our country a tougher place to enjoy, work and grow old. Climate change-induced extreme weather events are intensifying and become more frequent: drought, bushfires, heatwaves and floods require significant changes to our major infrastructure and government planning if we are to keep our standard of life.
Among other reasons, the Intergenerational Report should address climate change precisely because it will have a significant impact on the economic and fiscal projections the report makes.
These fundamental threats to our security and economic wellbeing are almost completely ignored by the Intergenerational Report. While the report mentions a number of minor short-term policies, it fails to grapple with the need to manage the costs and maximise the benefits of a transition to a net zero emissions economy later this century. It sounds ambitious, but this is what international authorities such as the IEA and IPCC say is necessary to achieve the globally agreed goal to avoid 2C of warming.
Australia should benefit from the global shift away from carbon-intensive energy - as a severely climate-exposed developed country we have a stronger interest than most in achieving zero emission by mid-century. But as the rest of the world, particularly China and the United States, moves forward on clean energy and carbon reduction, we are failing to capitalise on the opportunity.
Several government agencies do take stock of what might lie in store for the country, and advise on how we can best manage the challenges and opportunities that lie ahead. But their good work is neglected.
In early 2013 the Productivity Commission (PC) reported back on barriers to effective climate adaptation, but key problems it identified remain unaddressed. Another PC inquiry report on natural disaster funding was handed to the government in December, and remains dormant.
The Environment Department's assessment of Australia's preparedness for climate change is stalled. The Financial Services Inquiry headed by David Murray looks like another missed opportunity.
The Murray report, completed in December, offered some unexpectedly bold recommendations. For instance, many in Australia's financial sector were shocked by the call for the biggest five banks to hold more capital against their assets, and for restrictions on borrowing by superannuation funds. However the report only fleetingly mentions the general topic of emerging threats, simply noting that regulators plan and prepare for such threats.
This is the first major financial system inquiry since the global financial crisis, and, as these inquiries are conducted only every 15 years or so, it's a missed opportunity to clarify how Australian regulators might maintain vigilance on emerging sources of risk, especially as financial regulators in many countries now taking climate-related risks into consideration.
It would not be easy to estimate how much Australia's economy may stand to lose from a sudden regulatory shift to limit emissions, or from a series of natural disasters that expose our unpreparedness. Yet we can be quite sure that climate change is already affecting our economy and society, and will only do so more in the future.
Governments will come and go, but the laws of atmospheric physics remain - adding heat-trapping pollutants has consequences that can't be ignored. It is essential for every regulator, bureaucrat and policymaker to incorporate climate change intelligence into risk management. (The PC made recommendations along these lines in 2013). This is especially true for the Intergenerational Report, which explicitly considers the long-term sustainability of policies, laying the groundwork for the future of all Australians.
This week's report is a missed opportunity to address climate change, and it's one that history will likely prove costly and reckless.