Does Australia hold the keys to solving climate change?

Australia's sphere of influence goes far beyond our direct contribution to global emissions. And by understanding this we can pursue actions that will make a real difference.

Opponents of action on climate change often like to point out that Australia’s direct emissions are only 1.5 per cent of the global total, and claim that it therefore doesn’t matter what we do. But they’ve missed several key areas where Australia’s actions could dramatically affect global outcomes. 

If we’re serious about solving climate change, we need to fully understand how our actions influence the global stage, and act accordingly.

Australia’s action (or inaction) influences China and the USA

While it’s true that Australia’s direct emissions are only 1.5 per cent of the global total, it’s worth bearing in mind that we are not only one of the highest per capital emitters in the world, but also the 15th largest emitter in total. This means that of the 196 odd nations of the world, barely a dozen are larger than Australia. Therefore, if Australia isn’t moving, most other nations in the world can feel justified in a similar degree of inactivity.

Australia also enjoys a high degree of popularity in the international psyche, to which any frequent traveller will attest. We take up a lot of space on the global map, and everyone knows where we are and something about us. This means that our action (or inaction) takes on a significance in the minds of international voters that is far in excess of 1.5 per cent. Just as we are watching what other prominent nations are doing, they are watching us.

In particular, as our most important trading partner, China cares deeply about what Australia does.  Given our state of political uncertainty the Chinese are asking for assurances that Australia’s carbon price will remain into the future. Greg Combet was hounded by repeated questions from the Chinese delegation at the recent Australia-China Climate Change Forum on how he could assure them that Australia’s carbon price is there to stay. 

With China’s pilot emissions trading scheme (starting in 2014) to already cover ten times the population of Australia and twice Australia’s emissions, they are already taking significant action.  China’s decision on whether or not to expand the scheme nationally in the next few years matters immensely. This will undoubtedly be affected by their perception of whether Australia is ‘doing its fair share’.

Australia is large enough to influence global renewable energy markets

As the 14th largest electricity consumer in the world, Australia has the potential to be a major player in developing renewable technologies. 

Renewables and fossil fuel technologies are now close enough in cost that investing heavily in renewables to bring them down the cost curve could have dramatic influence over the investment decisions of other nations. By bringing forward the point of cost competitiveness of renewable energy we could drive huge emissions reductions, particularly in developing economies that are likely to be reluctant to take on carbon pricing in the near term.

Australia consumes seven times more electricity than Denmark, which has long been the largest wind turbine exporter in the world. What would happen if Australia staked a claim on solar thermal technologies? Thus far we’ve observed a 15 per cent reduction in cost per doubling of cumulative deployment, and with around 3 GW of solar thermal plant in operation or under construction at present, the replacement of Australia’s 30 GW of coal-fired capacity with solar thermal could halve the cost of this technology. 

This could dramatically change the investment decisions of nations around the world, and provide Australia with a vibrant export industry. This is not to suggest that this is necessarily the best path forward, but it certainly suggests that Australia has the potential to be a big player in this space and bears further analysis.

It remains Australia’s choice to expand fossil fuel exports (or not)

Of course, we also need to acknowledge that it remains our choice to expand our fossil fuel exports (or not), and with Australia on the path to becoming the largest fossil fuel exporter in the world, our potential influence in this space is immense. 

By supplying vast amounts of fossil fuels into international markets over the next two decades we have the potential to reduce global fossil fuel prices, increasing the likelihood that other nations (particularly developing nations) invest in coal and gas-fired generation. 

Alternatively, we could choose to slow or prevent expansion of fossil fuel mining through a range of possible mechanisms (such as meaningful mining taxes). This could allow international fossil fuel prices to gradually increase, bringing forward the point where renewables are cost competitive with gas and coal, naturally focusing investment in zero carbon generation. 

These actions are likely to be controversial and politically challenging to implement, but they are most definitely within our sphere of influence.  It is in Australia’s interests to fully explore these options, and understand exactly how they might play out in terms of the impact on the global economy, the actions of other nations, the potential for addressing climate change and Australia’s future prosperity.  At the very least, the Treasury should be seriously modelling scenarios that explore a future where fossil fuel exports are gradually transitioned down. This would allow us to make fully informed and rational decisions about the future of Australia.

These kinds of actions could also be very much in Australia’s immediate interests.

Recent assessment by The Climate Institute and GE has assessed which countries are best placed to compete in a low-carbon economy. Out of the G20, Australia scores 17th, indicating that based upon our current economic mix, we’re not well placed for a prosperous future. Furthermore, our score is stagnant, having barely moved since 1995 (the most recent assessment was based upon 2010 data, and therefore does not take into account any impacts of Australia’s newly introduced carbon price). 

By contrast, nations such as Indonesia, China, Brazil and South Korea are all moving ahead in leaps and bounds. Even Saudi Arabia is accelerating at such a pace that they could overtake Australia in low carbon competitiveness in the next few years.

But it’s not all doom and gloom. Australia’s vast renewable resources give us a huge advantage in establishing ourselves as a home of energy intensive industries. In the past we have attracted them with the promise of low cost, low risk energy. 

By leading the global transformation we are excellently placed to continue in that tradition. As stated by David Cameron, the Prime Minister of the United Kingdom, “it is the countries that prioritise green energy that will secure the biggest share of jobs and growth in a global low-carbon sector set to be worth $4 trillion by 2015.”

For further discussion refer to “Laggard to Leader - How Australia Can Lead the World to Zero Carbon Prosperity”.