Carbon Reduction: Getting Closer To Getting It Right
Rosehill, Australia August 26, 2008

Australia’s approach to climate change has evolved. Now, BP’s Gerry Hueston argues that the country must evolve with it, by coming together to translate the new policy consensus into practical action and results. Gerry Hueston is President of BP Australasia and a member of the Business Council of Australia’s Sustainable Growth Taskforce.

BP has spent the best part of a decade repeatedly arguing the case for policy certainty around climate change to allow business to manage the associated risks affecting their operations and to allow future investment in our energy infrastructure to be secured. With the release of the Government’s Carbon Pollution Reduction Scheme Green Paper, it is now clear that Australia’s response to climate change has evolved, and in the direction and manner that business requires.

This is an evolution of certainty, as the Green Paper provides a clear signal to business that there is a policy commitment to early action, based on market mechanisms, and with economic risks dealt with directly rather than thwarting the whole.

This is an evolution of leadership, because in some countries there is no consensus for early action at all, despite clear evidence that the costs of delay outweigh the costs of action

This is an evolution of strategy, because it has the potential to deliver a competitive advantage to Australia through the adoption of market mechanisms, such as emissions trading, in comparison to the use of inefficient taxes and regulations.

And this is an evolution in progress, because despite Australia having a lot at stake as an energy exporter and an economy dependent on energy intensive industries it has chosen to address the risks directly and not opt out of addressing its challenges.

Now, the challenge is to translate our evolution in principles into practical actions, as the Green Paper becomes a White Paper.

Now is certainly not the time to be mired down in unproductive arguments, and yet it is evident that Business and NGOs have got off to a bad start. Many have quickly settled into the old terms of debate: presenting an adversarial paradigm of business wanting opt-outs from meaningful action.

This paradigm is flawed. I support early action on climate change and I support emissions trading because it provides a broad based response to reducing our emissions, and in a way that can allow the impact on the Australian economy to be carefully managed. But for a decade now, progress has been thwarted by an obsession with the risks to the short term economy. Unfortunately this progress is still at threat unless all parties become involved in a policy debate that includes getting the balance right both now and in the future. There is no doubt that risks to our economy are real: without proper mitigations, there will be a trade distortion due to early action, it will disadvantage Australian businesses which compete internationally, and it will put at risk thousands of jobs across the economy. Critically, there will also be a social impact as families on low incomes face a disproportionate burden from higher fuel and energy costs.

These risks are unintended, unproductive, and unnecessary: and unless we tackle them they will continue to be able to thwart meaningful progress and put at risk Australia’s energy security. Even the sickest of patients cannot take his medicine unless the side-effects are treated. The less mitigation there is for the risks, the less meaningful the carbon price can be.

It is clear then that we must get the right mitigation policies in place if we are to avoid excessive trade distortion, enable Australian businesses to compete both at home and abroad, secure present and future employment and cushion the impact on those in our community who are disadvantaged. Mitigation is not opting out, and it in no way undermines the effectiveness of a Carbon Pollution Reduction Scheme. It is in fact the confidence that Australia can get these mitigation policies right that encouraged the business community to abandon their reticence on climate change, and to become involved in preparing for action. Getting it right is ultimately what has enabled Australia’s approach to climate change to evolve.

Business, Government and NGOs must stop debating whether to support these policies – and start focussing on the practical details of how to make them work.

After all there is plenty at stake. Across the world we're at an inflection point as far as the future energy mix is concerned. Demand for energy is increasing at a rapid rate, and with that comes increased greenhouse gas emissions. If we can get our policy structures right, we will be able to smooth the transition to a lower carbon economy while providing for a stable and secure energy future. If we don’t, then that transition could be very difficult and very costly indeed.

A global trading system should of course be Australia’s ultimate objective; otherwise some high-emitting nations will enjoy a "free-ride" on the reductions of others. But just because that is not achievable immediately, should not deter Australia from starting now. There is no doubt that the only way to effect any change is to set an example, and find ways that will allow for cooperation. But we won’t be able to move on to a focussed and fruitful discussion of the policy details that can lead to effective change both at home and abroad until we acknowledge that the broad principles in the Green Paper are sound.

Source: BP Australia