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Warming: it's time to come clean

If the scientists are right, global warming will become the most important issue facing us this century. So far, the trends suggest they are right. The world's weather is getting hotter, more volatile. What is the world doing about it?

The responses vary. But by and large, governments and companies are going about business as usual, with some low-cost amelioration measures at the fringe. There are exceptions, but on the whole, there is little sense that we are facing a long-term crisis requiring radical changes.

Last week saw a stunning example. To back up the Government's Asia Pacific summit on climate change in Sydney, the Australian Bureau of Agricultural and Resource Economics produced a report estimating that, based on heroic assumptions about new technology being invented and implemented, its projected level of global greenhouse gas emissions in 2050 could be reduced by 23 per cent. Good news!

But ABARE did not feel it necessary to tell us what those projected levels are. Only one graph let the secret out: even with this best-case scenario it projects, global emissions of greenhouse gases would more than double by 2050. Instead of heating up the planet by emitting about 8 billion tonnes a year of carbon dioxide equivalent, mankind would fry it by emitting 17 to 18 billion tonnes a year.

Bear in mind that Environment Minister Ian Campbell, backed by leading scientists, has warned that the world needs to reduce emissions by 50 to 60 per cent to stabilise the climate. ABARE is projecting that by 2050 global emissions will be four to five times higher than the level Senator Campbell says is needed. That is simply alarming.

The same day in Washington, the Worldwatch Institute released its annual State of the World report for 2006. It estimated that if China and India were to match even Japanese and European levels of resource use, they would consume the world's entire annual supply of oil and mineral resources. The soaring oil and resource prices of 2004 and 2005, are "a preview of the future".

"It is clear that the current Western development model is not sustainable," the institute's director, Christopher Flavin, concludes. "We therefore face a choice: rethink almost everything, or risk a downward spiral of political competition and economic collapse."

I vote for rethinking almost everything. But governments and businesses, with some exceptions, do not work that way.

For them, the incentives are to produce business as usual. Don't make voters pay higher taxes or prices to tackle global warming, or they might vote you out of office. Don't waste serious money on research and development into technologies to cut long-term emissions, or you will have to pay out lower dividends to shareholders.

It is this kind of thinking that has jeopardised the long-term future of Australia's coal industry, which is sitting on 200 years of reserves - if they can find ways to burn coal without producing so much greenhouse gas. If they can't, then much of Australia's coal wealth may end up unsaleable. That has been clear for years, yet our mining chiefs have buried their heads in the sand.

When humans need to solve a problem, they usually can. Given the determination, given the resources, we can come up with the radical cultural, economic and technological changes we need to reduce our emissions of greenhouse gases. What we cannot do is to dictate to nature.

What do we need to do? Let's move beyond the argument over whether we should sign the Kyoto Protocol, or merely comply with it. What we need is a realistic policy within Australia that is commensurate with a problem that, as Campbell says, threatens to become a disaster.

First, dump the complacency and self-congratulation. The Australian Greenhouse Office estimates that even with all the measures taken to reduce them, greenhouse emissions from energy use will rise 70 per cent between 1990 and 2020, while industrial emissions will rise 75 per cent. Total emission growth would be held to 23 per cent only by one-off changes in land use, which are now behind us. Admit the problem, and come up with policies appropriate to the scale of it.

Second, we need a policy structure that gives markets and households a strong incentive to reduce their use of energy, both by changing their behaviour and by investing in energy-saving technology. There is a simple, logical way to do it - tax carbon emissions.

A tax on carbon could be offset by cuts in other taxes. Or the funds raised could be used to subsidise research, development and installation of energy-efficient technology, from a solar water heater to a pilot plant of new technology for generating electricity. Or we could do both. It need not make us poorer, and it will make our children richer.

Third, we need an emissions trading system to minimise the cost of carbon taxes on energy-intensive industries. A report last year by the US Energy Information Administration estimated that a combination of emissions trading and higher fuel efficiency standards in vehicles and buildings could cut projected US emissions by 11 per cent by 2025 - more than Australia's annual emissions - at a cost of just 0.4 per cent of GDP. That's value.

But ultimately, as Worldwatch argues, we need to rethink "almost everything": the way our cities develop, priority for roads over rail, time of day pricing for electricity, air-conditioning, the lot. Unless the world changes for the better, it will change for the worse.

--

Tim Colebatch is economics editor.
The reports can be found at www.abare.gov.au, www.worldwatch.org and www.eia.doe.gov

Editorial Notes: The economics editors of major Australian newspapers do not usually sound like this. The neoliberal Howard government remains totally opposed to a carbon tax, with the Opposition 'Labor' party lukewarm at best. -LJ

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