By Keith Orchison
(Written in July 2006)
It's the $64 billion question: how to wrest the planet from the jaws of serious climate change without wrecking the global economy.
The environmental activists' answer is that countries like Australia must show the way, preferably through a carbon tax to force change in how we make electricity.
The flaw in their argument is a big one and it has been pointed out by the consultants on a "carbon price signal" that they have been using. In its assessment of the impacts of deep cuts in Australian greenhouse gas emissions, commissioned by the Business Roundtable on Coimate Change, Allen Consulting Group issues this dire warning: "Any large-scale unilateral action by Australia would constitute bad policy in that it would impose significant costs on the community while having a neglible impact on climate change."
This sentiment has been reinforced this month by no less than the President of Britain's Royal Society, Professor Lord Rees, who has proposed in Science magazine that the greenhouse challenge demands "a high profile response analogous to the Manhatten or Apollo projects, but on a global, rather than national, scale." Rees suggests that the world will need to spend (in Australian money terms) around $64 billion to decouple economic growth from greenhouse gas-emitting energy production.
Here in Australia, the Bureau of Agricultural and Resource Economics (ABARE) has provided a stark calculation of the cost of unilateral action to cut national greenhouse gas emissions to 50 per cent below current levels by 2050. ABARE says Australians would pay for this by a cut of around 20 per cent in real (ie inflation-adjusted) wages -- and the pain would be felt worst by those living in regions like the Latrobe Valley and Geelong in Victoria, the Hunter Valley and the Illawarra in NSW, and Gladstone and the Bowen Basin in Queensland.
The biggest losers of all would be Australia's energy-intensive manufacturing sector, which accounts directly and indirectly, for one in 10 jobs and would suffer from a large rise in power prices with global competitors in developing countries not suffering the same burden.
The issue of how to fix the global climate change issue through major energy structural adjustment in only the OECD countries is the biggest challenge of all.
The problem involves countries like India, the South American nations and several in Africa, but by far the biggest hurdle is China. China alone will build 500 new coal-fired power stations in the next decade. New electricity supply there is growing at the rate of the Australian electricity grid capacity every nine months. Over the next 20 years the Chinese aim to give 120 million people access to electricity for the first time -- that is almost five times the population Britain industrialised over a century.
As a result China's greenhouse gas emissions will double in the next 15 years and by 2030 will be more than 10 times Australia's current emissions and more than the US is projected to be emitting then. Overall by 2030 the developing nations will have surpassed the OECD countries as emitters.
"If there are going to be significant reductions in greenhouse gases, then we will need significant global initiatives," says ABARE's International Branch manager, Dr Don Gunasekera.
For Lord Rees, the answer lies not in the Greens' catch cry of "think global, act locally," but rather in a worldwide research effort driven by governments, acting urgently, to find "new kinds of energy." His point is that, while there are a range of lower greenhouse gas-emitting energy sources already available, and while they can be expected to play an increased role in future power supply, all are more (and some much more) expensive than coal. To resolve the problem, the world must break the energy mould without creating massive economic and social disruption.
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