In this book McCarthy, who wrote No Country for Old Men, takes us on a journey with a father and son in a post apocalyptic world cadging, battling and desperately innovating as they stumble from a US hinterland towards the coast.  It is an almost completely unrelenting account where, to paraphrase Tim Flannery, the future has been eaten.

My own father is an alumni of Sydney University, graduating as an electrical engineer before rising though the ranks of the NSW Electricity Commission.  He headed the region from Wagga Wagga out to Broken Hill and occasionally I would take the road with him as the Commission slung transmission lines across the countryside to welcoming towns across the lands of mostly welcoming farmers.

On journeys to the central coast for holidays Dad would take us to gaze in awe at the furnaces at the heart of coal fired power stations like Munmorah.

This has made for some interesting family dinner conversations in recent times!

My father however, though justifiably proud of his achievements and questioning of the ability for alternatives to replace the base load capacity of these awesome power stations, knows we have to move on.

The journey that we, and our sons and daughters, take over coming days and years – particularly over the next decade – will see big moves for Science, Humanity and the Environment.  Whether that is to the edge of collapse or to an exciting evolution depends on leaders in business, our political representatives, and ultimately us as active citizens.

It will be a journey in parts terrifying but hopefully mostly thrilling.

The outcomes of this journey will depend on the progress we make on carbon pollution reduction targets, technologies and the till – or how we shape public and private investments.

Tonight I would like to take you through The Climate Institute’s analysis and aspirations in these areas and also do a brief stocktake of domestic and international progress towards climate action and the evolution of a global clean energy and low carbon economy.

We meet as world leaders prepare to hit the road for crucial meetings next week of the UN in New York and the G20 in Pittsburgh, crucial as we head towards Copenhagen UN climate agreement negotiations in December.

As you’ll see, there are grounds to be terrified and grounds to be thrilled.

Targets

The world already has dangerously high levels of greenhouse gases in the atmosphere.

The relatively stable pre-industrial levels of around 280 parts per million (ppm), that accompanied humanity’s civilisation journey of the last ten thousand years or so, has risen to 463 ppm. Aerosols from other pollution sources are dimming the effect to levels just below 400, but this is most likely a temporary buffer and the rise is, as yet, unrelenting.

Scientists for some time have been telling us that going above 450 ppm is more than a 50/50 chance of exceeding global warming of more than two degrees above pre-industrial levels.  More recently they have been more stridently urging a return to 350 ppm or indeed back to 280ppm levels.

There has been a lot of heat in some quarters about whether you are serious if you back 450 v 350 as targets but in our view this has obscured the vital importance of peaking global pollution before 2020.  The raw physics of the amount of greenhouse gases in the atmosphere mean that if you don’t peak before 2020, it is virtually impossible to achieve either scenario with the 350 ppm scenario obviously needing a faster reduction in carbon pollution after 2020.

To some extent losing focus on this vital 2020 achievement leads to debates like the medieval debates of how many angels on a head of a pin, or as Paul Kelly sang - how many cabs in New York City or how many tears in a bottle of Gin.

To avoid confusion it is The Climate Institute’s view that we should get to 350 ppm and lower over time but we are focused on the 2020 date and the need to minimise the “overshoot”, over 450 or 350 levels, to no more than 500 ppm.

The Intergovernmental Panel on Climate Change lowest, 450ppm, scenario requires reductions for developed countries as a group of 25 to 40% below 1990 levels, with significant reductions below business as usual for developing countries, estimated at around 20% below BAU, and peaking of global carbon pollution before 2020.

Estimates of current developed country contributions are in the 13 to 23% range.

Developing country commitments are less clear but one analysis of current Chinese domestic commitments, for example, would see it come close to 20%.  The challenge is for them to commit to this and perhaps more at an international level.

While the commitments hang precariously in the balance, it was important that in July a number of countries crystallised the two degrees warming as a key reference test.  For the first time, world leaders from US, China, India, Russia and Japan, amongst others, recognised this figure. It is an important new reference point even if it would have been better to have harder commitments.

Australia’s commitment of a conditional 25% reduction is a significant reduction from where levels were heading on current measures, to 20% above 2000 levels. It is true that it is a more significant potential contribution from current positions than others have put on the table.  Equivalent contributions from other developed countries would see the group of countries reduce by 30 to 40%.

It may come as a surprise to some, but behind the veil of bickering, both major parties share a vision of Australia’s national interest.

Both share the view that Australia’s best interests lie in stabilising global greenhouse gas concentrations at 450 parts per million (ppm) or lower.  Both have backed a target of reducing Australia’s carbon pollution levels to 25 per cent below 1990 levels by 2020, subject to comparable efforts from other countries towards that 450 ppm goal.

Sure this consensus between Labor and Liberal rests on some shaky foundations but it is the public position today of both.

Assuming this remains, how committed are our political leaders to ensuring that our economy has the technology, and indeed the competitiveness, should the world move towards that 450 ppm goal or lower?

Technology

One way of thinking about technology is about how it contributes towards what is known as carbon productivity of an economy – the amount of economic output per unit of carbon pollution.

On Monday The Climate Institute and European think tank E3G released a new report¹ on the carbon competitiveness and productivity of the G20 nations meeting in Pittsburgh next week.

The report reveals while there are global grounds for optimism, with most nations increasing carbon productivity, almost all aren’t increasing quick enough. Australia lags on key tests.

McKinsey consultants have previously estimated that to achieve the 450 ppm goal, and maintain economic growth and living standards, there will need to be a tenfold increase in carbon productivity.

McKinsey’s put this another way by saying this is like achieving the growth in labour productivity since the industrial revolution, in a third of the time.

This is not as daunting as it sounds considering we aren’t starting from the poorly educated, low skilled start of the industrial revolution.

McKinsey’s, like so many others, say this can be achieved for annual investments of around 1 per cent of the global economy.

What’s never been mapped before is the carbon competitiveness of key countries.

The G20 is an ideal test bed with its developed and developing country members accounting for nearly 75 per cent of global GDP and nearly 70 per cent of global carbon pollution.

The G20 Low Carbon Competiveness Report², which is available on our website, details three indices:

·    the low carbon competitiveness index (using carbon productivity as a starting point),
·    the low carbon productivity index (how quickly their carbon productivity is improving) and
·    the low carbon gap index (whether countries are improving quickly enough to help achieve the IPCC 450 ppm scenario).

Many countries are rising to the challenge of carbon competitiveness.  The structural reforms of the 1990s positioned countries like Germany and UK well, but emerging economies like South Korea, which put 70 per cent of its stimulus in low carbon investments, are catching up.

As Lord Nicholas Stern writes in his preface to the report, “a global economic recovery will present an ideal opportunity for countries to shift towards low carbon growth. Countries who don't seize this opportunity will undermine their future competitiveness and prosperity.”

There are many positive signs that these opportunities are being seized and of an emerging global clean energy economy:

o    The global ‘low carbon and environmental goods’ sector is now valued at A$6.1 trillion.
o    In 2008 alone, US$155 billion was invested in new clean energy sources, representing a four-fold increase since 2004 and, for the first time, outstripping investments in the fossil fuel technologies.³
o    Worldwide, the renewable energy sector already employs an estimated 2.3 million people – more than the total number employed directly by the oil and gas industry.⁴
o    In Germany the renewable energy sector is predicted to employ more people than car manufacturing by 2020⁵

But we need to urgently accelerate this movement.

The report found that only Mexico and Argentina are currently improving their carbon productivity at a rate which, if continued, will meet their share of a 450 ppm global target by 2020.  They lead the gap index.

South Africa and Germany are close to being on target and China would also be close if it could return to the carbon productivity gains of the 1990s.

Australia is 16th on this gap index, with only Turkey, Russia and Saudi Arabia requiring bigger turnarounds to reach this target.  While its carbon productivity is improving, rating 7th on that score, the report estimates Australia will need to double this rate of improvement.

Australia’s low ranking stems from a number of aspects including its carbon intensive exports, low use of clean energy and high consumption of transport fuels. This places Australia 15th on the carbon competitiveness index.

This report shows Labor and Liberal risk crashing our national interest if their negotiations on the Carbon Pollution Reduction Scheme succumb to the pressure of big polluters seeking further handouts or delay.

In fact we need to be strengthening the scheme, dedicating more funding to cleaner technologies and adding more decisive energy efficiency and other measures to improve Australia’s carbon productivity.

There is enormous potential across existing technologies, in particular those that increase energy efficiency. McKinsey’s estimate we can do 70% of the job to 2030 with existing technologies.

Some question whether the 70 % figure is that high but on any analysis there’s both plenty to get on with as well as a need to drive key new technological developments and breakthroughs in solar, in smart grids, in batteries and more.

From an energy supply technology point of view we stand at the edge of a valley of uncertainty – not I hasten to add a chasm – a valley of uncertainty.

Australia has exciting potential for some serious competitive advantage across a range of clean energy technologies – solar thermal, geothermal, biomass, distributed power, wave and tidal, and carbon capture and storage for both fossil fuel and biomass power as well as industry.

But many of these need investments and improvements.

We need a policy approach that aims to get a diversified portfolio of clean energy options at commercial scale by 2020.

A portfolio approach is important because one or more of these may not prove viable.  It is important that we know what is unviable sooner rather than later and having a range of options at commercial scale will help us know what to put the foot down on from 2020.

To cross the valley we’ll need policies to support research and development but also provide ongoing financial and investment incentives.

Developing these technologies will not only help boost our carbon productivity.

And it will not only provide us with clean sources of energy to power our prosperity.

These technologies, if shared appropriately, will power the prosperity of developing countries especially those in our region.  As we have discovered over the last decade growing prosperity in our region is integral to our own prosperity.

Professor Garnaut in his review called for 20% of the revenue from the CPRS to be directed towards cleaner technology development here in Australia and in developing countries.

It is a goal we support.

Currently just 2% is dedicated in this way.

It would be churlish not to acknowledge that the recent budget and stimulus package invested billions in clean energy initiatives on CCS and Big Solar and in energy efficiency.

And the new renewable energy target of 20% by 2020 will drive over $20 billion in investment in renewable.

There are key questions about this clean energy initiative and the renewable energy legislation but if appropriately administered, and backed by a growing carbon price, can come close to meeting the policy goal of a mixed portfolio of clean energy options at commercial scale by 2020.

These are welcome steps, but we need to ensure that a predictable stream of public investment will be available to finance technological development both here, and as I describe below, in developing countries.

We can not allow the big polluters, nor indeed, the big debt, to gobble up CPRS permit revenues post a transition in 2015.

The Till

Predictable public and private investment streams are important because an agreement in Copenhagen depends upon not just targets but on financing to assist developing country efforts to clean up their development pathway.

The Bali Roadmap, (which also – separately – was endorsed by the Coalition under the new Ambassador to Europe Brendan Nelson) has dual obligations, targets and a substantial, measurable, reportable and verifiable financial and technology package.

As well as the issue of deforestation, unless there are strong targets and strong financing we won’t get an agreement of any kind in Copenhagen.

This is a key remaining policy gap for Australia and other developed countries but there have been some signs of movement of late.

Gordon Brown finally broke the surface on this debate by recently outlining his view of the scale of public and private financing for mitigation and adaptation in developing countries at around $100 billion per year by 2020.

Oxfam has estimated this need at around $150 billion per year, but it is clear a financing package must unlock trillions of dollars of new public and private investment in smart and clean energy solutions, facilitate low carbon strategies, accelerate technological innovation pathways and support adaptation to the impacts of climate change in developing countries.

The public, enabling, component of this financing can be achieved by a number if means. It could be done by channeling some of the permit revenue from the CPRS, particularly after initial transition assistance expires or is no longer necessary.  The US Waxman Bill has such an approach.

There are also other potential reliable sources of funding in separate cap and trade schemes for international shipping and aviation – and Virgin and other airlines have suggested just such a thing in recent weeks.

Other constructive proposals have come from Mexico and Norway.

Finance Ministers were supposed to have advanced this financing issue at their meeting earlier this month in London.  There is some confusion on what exactly happened but not enough happened. 
Next week’s G20 world leader meeting is vital to getting that back on track.

The UNFCCC meeting happening this year in Copenhagen is traditionally a meeting of Environment and/or climate ministers.

With the financing aspect so critical it is vital that Finance Ministers are actively engaged to augment that process.

On a broader level of private investment and the risk management of financial institutions like the super funds that manage our nest eggs, there are some key challenges.

The risk management is not just about preparing for climate impacts already upon us (and which will get worse), nor is it is just about hedging investments to avoid sub-clime risks – it is also about not managing to miss the low carbon economic train already leaving the station around the world.

As a memo to Steve Fielding and others, every year this century, from 2001 to 2008, has been in the top 10 of the warmest years since instrumental records began in the middle of the 19th century.  El Nino which created the 1998 spike that has so excited many is now re-emerging…

That the climate crisis is with us now was not only vividly displayed with what the Bureau of Meteorology described as extraordinary and unprecedented heat waves of January which saw morgues overflow, damaged infrastructure like railways and fueled the terrifying fire weather conditions of Black Saturday.

The current impacts were also vividly displayed with the ironic news that Newcastle’s coal loader is being built metres higher than current sea levels – at extra cost.

Coastal planning laws have now been changed and we know different insurance regimes are applying closer to the coast as well.

The costs of climate change are already hitting business.

However, like the risks of the sub-prime crisis, most of these risks are not priced in to the risk management of many of our financial institutions.

Last year we partnered with the Australian Institute of Superannuation Trustees to conduct the world’s first survey of superannuation funds management of climate risks and opportunities.

We have focused on super funds, because unlike other financial institutions, yet, they have long term legal responsibilities.

We discovered:
·    83% consider climate risks as part of trustee responsibilities
·    85% plan to increase their climate change capability through staffing and training
·    But only 9% are trying to measure the exposure of their portfolio climate change risks

That will change.  That is changing.

You can rest assured that we are doing everything we can to help some of the last holders of investment cash in the economy change their funds management practices.  We have sat down or are sitting down with some of the largest funds discussing a best practice methodology we have been developing with the AIST.

We know that is already changing investment patterns but to be sure yesterday we and the AIST announced the second of these surveys, which this time will publish the performance of many of our super funds.

But it is not only us.

Earlier this year the G20 agreed on steps to better integrate long term planning.

As part of these commitments, was the formation of a new regulatory body – the G-20 Financial Stability Board – designed to promote financial stability and management of systemic and long-term risk.  There are also domestic reforms afoot.

These regulatory and management reforms will lead to diversification of investment and a review of past investments.  This is not just about pricing in physical risks but also about pricing in the possibility of steep rises in carbon prices and/or regulatory impacts on carbon intensive industries.

But really our biggest risk is that we follow the lead of the US car industry, succumb to dumb carbon protectionism and leave Australia to being a carbon ghetto.

A protectionist approach that has left MoTown a virtual NoTown.

To quote Lord Stern again:

Low carbon growth … - or low carbon technologies and innovations and investment - will be the big drivers of growth over this next 20 or 30 years. We're about to see a technology and innovation driven growth story which will be at least as big as the railways, electricity, the motor car and information technology. This next 20 or 30 years is going to be very exciting. (Stern, 7.30 Report 27/5/09)

Australian scene

Given the bipartisan view of the national interest in an ambitious global agreement I mentioned before, you might think that the springs of Australian politics would be pushing for policies that make us competitive in this emerging global clean energy economy, and cooperative in helping reach a global climate agreement.

Unfortunately what we have witnessed has been a carnival of carpetbagging, special pleading and deception of such intensity that the springs have been pushing towards excessive protection for big polluters and economic practices of the past.

This is a vastly different scenario to that in the 80s when both parties forged a consensus on removing tariff barriers, with a world facing view and the realities of long term competitiveness firmly in sight.    
For some two decades Australian and global businesses knew this moment was coming and we recently recognized the ten year anniversary of the previous Howard Government’s first consideration of an emissions trading scheme.

Some companies have been repositioning and diversifying their portfolio or developing technologies to be ready for this and others have been putting shadow carbon pricing on their business decision making.

Despite this the last two years of policy development since the Federal Election, in which climate change featured so significantly, has seen a frenzy of lobbying arguing for delay or special treatment.

Research conducted for The Climate Institute has shown the thin rational veneer covering the two major claims.

Firstly, the claim has been that these policies will lead to “carbon leakage” with jobs and industries shifting overseas for a more polluting outcome.  For some reason it was always jobs going to China and India which seemed the most offensive…

While we recognize the need for some assistance for emissions intensive trade exposed industries, particularly in areas like steel, the loudest claims have come from aluminium and some natural gas suppliers.  Their claims of carbon leakage are thin indeed.⁶

The aluminium industry is growing in countries overseas with clean energy – mostly hydro and modern plants are mostly more efficient than ours.

The claims from natural gas suppliers like Woodside are even more extreme as that is an industry most likely to succeed from a carbon constrained global economy. One only needs to look to the $50 billion Gorgon LNG development to see this is not an industry fretting about its future.

Secondly, and this is a classic argument in any reforms, the argument that climate policies will kill jobs.

In fact, we recently released research which analysed the business proposals on the table should policies like the renewable energy target and emissions trading get up.  It found proposals all around Australia, much of it in regional Australia, that would grow over 26 000 jobs and direct over $30 billion of investment.⁷

Our report came out just after the Minerals Council had played one of the oldest cards in the climate policy deck – the “trick” of portraying modeling results that show a relative drop in jobs (or growth) against a reference case as an absolute drop.

So despite modeling results which in reality showed absolute jobs growth in the mining sector in Queensland of 120%, The Australian greeted us with a headline of “jobs carnage” and a 24 000 jobs slump.

I had the pleasure of following Mitch Hooke, CEO of the Minerals Council, at a Senate Inquiry hearing recently and under questioning he admitted:

“We are not talking about scorched earth here, we know we will continue to grow.”

Modelling published by Treasury has shown that even with significant cuts in carbon pollution Australia’s economy will continue to perform strongly, leading to continued growth in employment and wages.  Furthermore, CSIRO found that total employment in Australia would increase by 2.7 million jobs over the next two decades under a scenario where Australia becomes carbon neutral by 2050.⁸

Even in the more carbon intensive industries total employment growth is projected to be strong, with CSIRO projecting a 30% increase in employment in the minerals and energy commodities sector.
This exposes the myth that taking action on climate change will cost jobs.

Recent studies show that with the right policy drivers, up to 1 million new jobs in clean energy, clean technology sectors could be created over the coming decades as Australia shifts to a clean energy economy. While each of study uses different methodologies, and hence arrives at different numbers, the conclusion is absolutely clear: with the right policy signals, Australia could experience a clean energy jobs boom over the coming decades.

This is why The Climate Institute has joined with Australian Council of Trade Unions, Australian Council of Social Service, Australian Conservation Foundation and WWF to launch a national clean energy jobs campaign.  These groups form something we call the Southern Cross Climate Coalition.

As well as highlighting these opportunities, this campaign highlights that there are dinosaurs in politics and business blocking climate action that could create hundreds of thousands of clean energy jobs.

You may have seen some dinosaurs outside Parliament house a few weeks ago, and some have been roaming around elsewhere – all part of a grassroots campaign being built to Copenhagen and beyond.
SCCC has a ten point plan for climate action and hundreds of thousands of new jobs in a clean energy economy which comes down to three things:

1.    Strong targets to reduce carbon pollution alongside financial assistance for developing countries efforts to reduce their pollution and help them prepare for unavoidable climate impacts
2.    Investment incentives and standards to drive business performance towards creating the clean energy, construction, manufacturing, resource and other jobs that will be successful and sustainable this century
3.    Support for skills development in existing and emerging job areas, for low income households, and for those strengthening our farms, rivers and bushland to help them cope with a changing climate

Action in these areas can help Australia be competitive in the emerging global clean energy economy and be cooperative in forging an effective global climate change agreement.

The UN climate negotiations are at a critical juncture, as is Australian climate diplomacy.

For the nearly 20 year history of the climate talks Australia’s climate diplomacy has been monopolised by narrow concerns about the impact of global or domestic action on our coal and energy intensive industries.

That monopoly is under challenge. Community concern about the impacts of climate change on Australia, high level defence concerns (as noted in the recent Defence White Paper) about the geopolitical consequences of climate change, and a broader sense of economic opportunities are challenging that monopoly.

Like all monopolies this one is tough to dislodge and they have been defending their territory with the viciousness of a T-Rex.

Australia will still be vulnerable to attacks that it is still under the thrall of the polluters' monopoly until it matches its more ambitious targets with improved positions on elements like financing for developing countries mitigation and adaptation.

The Australian economy as well as our global leadership will be vulnerable if the polluters' monopoly continues to get more handouts and to lock out reviews and flexibility of the CPRS and other measures.

Conclusion

As we head into the crucial second decade of the 21st century, we face a complex roadmap.

UN climate negotiations and Australian politics are at vital junctures.

I am by trade a professional optimist, but not a naïve one.

However I do think we will get an agreement in Copenhagen, maybe not a ratifiable treaty just yet but an agreement with strong foundations.

I agree with Professor Garnaut and think any fair assessment of the Government’s conditions for various targets, and the commitments of developed and developing countries already on the table, see Australia looking at a 15 % commitment.

The progress that needs to be made in coming months may yet get that up to a 450ppm agreement which obligates us to do 25% and drives us towards a stronger more carbon productive economy in which science and technology will be key.

This could also represent a new road for our collective humanity as we ultimately head, as envisaged by Walter Westman, to an equity of lifestyles but hopefully not cultures.

It could lead to a reduction in priority for material things and the obsession with narrow measures of our well being, e.g Gross Domestic Product.

It could also lead down a road where we are better connected to other communities within our nation and with our nations neighbours.  And hopefully better connected to our natural communities.

As I said at the outset.  The journey that we, and our sons and daughters, take over coming days and years – particularly over the next decade – will see big moves for Science, Humanity and the Environment.  Whether that is to the edge of collapse or to an exciting evolution depends on leaders in business, our political representatives, and ultimately us as active citizens.

It is a road that is filled with potential terrors and thrills – if we get moving fast there’ll be more of the latter than the former.

I look forward to seeing you on that road.

Thank you.

[1] The Climate Institute (2009), G20 Carbon Competiveness Report, http://www.climateinstitute.org.au/images/carboncompbrief.pdf

[2] Vivid Economics, (2009), G20 Low Carbon Competitiveness Report http://www.climateinstitute.org.au/images/carboncompreport.pdf

[3] Innovas, commissioned by the UK Department for Business Enterprise and Regulatory Regorm (2009), Low Carbon and Environmental Goods and Services: an industry

analysis, at page 5, see http://www.berr.gov.uk/files/file50253.pdf

[4] UNEP, SEFI and New Energy Finance (2009), Global Trends in Sustainable Energy Investment 2009: Analysis of Trends and Issues in the Financing of Renewable Energy and Energy Efficiency, available online at: http://sefi.unep.org/english/globaltrends2009.html.

[5] Ban Ki-moon, “Green growth is essential to any stimulus”, Financial Times, 17 February 2009.

[6] Malik S., Knapp S., (2008) Emissions Intensive Trade Exposed Industry Policy, MMA

[7] See, The Climate Institute (2009) Clean Energy Jobs and Investment in Regional Australia http://www.climateinstitute.org.au/images/maps/cleanenergyjobs.pdf

[8] Hatfield-Dodds, S., Turner, G., Schandl, H. and Doss, T. (2008) Growing the Green Collar Economy: Skills and labour challenges in reducing our greenhouse and emissions and national environmental footprint, Report to the Dusseldorp Skills Forum, CSIRO Sustainable Ecosystems, Canberra.

 

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