Respond to Carbon with Care

The Australian

By Greig Gailey
President
Business Council of Australia

THE draft report of the Garnaut review into the impacts and opportunities associated with climate change raises some important issues for Australia to consider when determining how to respond to climate change, and provides a focus on the importance of a global response.

The draft report will be one of many inputs the federal government will consider as it consults with industry and the community on how best to design an Australian emissions trading scheme.

The focus for the Business Council of Australia is on the debate Australia will need to have following the release of the Government's green paper later this month.

At the end of the day Australia is seeking to play its role in reducing global emissions. We all know that the challenge of reducing emissions and dealing with climate change will be won or lost at a global level. This does not mean Australia should not take action. What it does mean is we must get the detail right as we take action.

The reality is that the introduction of a national emissions trading scheme in Australia, in the absence of a global price on carbon, requires a comprehensive response to two key issues.

The first is maintaining competitiveness and preventing carbon leakage and the second is ensuring business is prepared to take risks and invest because there is a predictable and long-term policy framework.

On the issue of competitiveness, let me set the scene by going back to the One Nation statement made in 1992 by then prime minister Paul Keating:

“I want Australia to be fiercely competitive in the world so that we can deliver opportunity and care at home. I want us to be strong within, so we can be strong in the world: a world which too often does not compete fairly.”

This vision for Australia remains relevant today and should guide our response to climate change, particularly where many of our competitors are not placing a similar price on carbon.

The only reason Australia is introducing an emissions trading scheme is to reduce global emissions. Establishing the scheme in such a manner that it simply shifts the location of these emissions elsewhere along with the economic benefits such as employment, taxation and research and development benefits neither the global environment nor the Australian economy.

Second, establishing the scheme that renders businesses presently located in Australia uneconomic, with the obvious impact on jobs, because we have introduced a carbon price ahead of others is again economically and environmentally irresponsible.

Many of the countries Australia competes with do not have a carbon price in place – and will not have one soon – and their production methods are often more energy intensive.

Sectoral competitiveness concerns are legitimate for trade-exposed, emissions-intensive industries. Careful analysis is needed to determine the best approach to ensuring competitiveness in the absence of a global price on emissions, and strategies must also be in place to ensure Australia does not lose growth in these sectors that would be sustainable when there is a global price on carbon.

These factors must be recognised as the Australian Government considers the design details of the emissions trading scheme and its position on the post-Kyoto arrangements.

A key point is that the impact of an emissions trading scheme on business investment and risk is something that all Australians should care about if they want to address climate change.

Whatever views are held of business, big or small, the fact is Australia's success in reducing greenhouse gas emissions and maintaining living standards depends critically on how business responds to the introduction of a carbon price.

The solution to climate change is not to arbitrarily limit economic growth or aspects of economic activity as some would have it. On the contrary, growth will provide the resources and opportunities, through investment and technological advance, to reduce emissions.

Business can contribute to reducing greenhouse gas emissions through:

  • Deploying existing low-carbon technologies.
  • Developing and scaling up technology that is near commercialisation.
  • Finding big breakthrough technologies.
  • Restructuring business processes and operations.

In other words, the solutions lie in investment and innovation. And it is business that can deliver these. While government will have a role to play, innovation and investment within businesses will provide the lasting foundations for success.

Lowering our emissions will take substantial investment and time. Transitioning too quickly without regard to the costs and investment implications will lead to greater disruption. Suffice to say that it will be important to create a policy framework that provides predictability to investors, be they investing in electricity supplies or products and services.

The introduction of an Australian emissions trading scheme and a price on carbon will affect business, industry and households in ways that many of us are yet to fully understand. The right design will allow Australia to contribute to reducing global emissions in a manner that does not lead to excessive costs to our domestic economy.

The BCA will continue to work with government to get the design right.