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Federal Minister for the Environment and Heritage
The Hon Dr David Kemp, MP

The Royal Institute of International Affairs
Chatham House, London
15 July 2002

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Australia's Approach to Climate Change

On our present understanding of climate science, dealing with climate change will be a key issue for the twenty first century. It is a task that will occupy the countries and peoples of the world throughout the century. On what we know important regions of Australia are potentially vulnerable to the effects of global warming. International arrangements will shift and change as we learn the most effective approaches to both common and national actions. We are at the beginning of this learning process.

We acknowledge that at this stage the scientific picture is far from complete. The IPCC's Third Assessment Report and other scientific reports make clear the extent of the remaining uncertainties - uncertainties we need to resolve to enable us the take the best adaptive and mitigation responses. While we continue to develop the science - an effort in which Australia plays a vital role, especially in the Southern Hemisphere - we endorse the need for appropriate precautionary action across the globe.

And this is not simply a rhetorical position. Australia was early to take practical actions to reduce its greenhouse gas emissions from the path they were projected to take and will continue to do so.

Our strategy is to move ahead on emissions reductions in a practical way as part of a broader national effort to put the management of the Australian continent on a sustainable basis. Our approach is characterised by a whole-of-government effort, action across all sectors of the economy and engagement with the community. It carefully balances environmental effectiveness, economic benefits and costs and social and regional impacts. Increasingly we will focus on policies and measures to encourage the early development and deployment of the next generation technologies that will enable a smooth transition to an economy with a smaller greenhouse signature.

Before the Kyoto meeting in 1997 we announced a package of measures balanced across the economy which we pledged to implement whether agreement was reached at Kyoto or not.

In the year 2000 we greatly augmented these through a major new program called Measures for a Better Environment.

In last year's national elections the Government committed to "develop and invest funding in programs to meet the target Australia agreed at Kyoto". Given the structure of the Australian economy, that target of 108% of 1990 emissions was tough but fair.

All up we have already committed to spend of the order of $1billion on greenhouse measures and put in place some institutional and regulatory measures that are setting the pace for world's best practice.

The Prime Minister established and personally chairs the Sustainable Environment Committee of Cabinet which oversights greenhouse policy. In my portfolio we have established the Australian Greenhouse Office to coordinate at the administrative level whole of government policy development and delivery.

The measures already in place will deliver around 60 million tonnes of reductions by 2010. These measures cross all sectors and are coordinated between the national and state governments through the National Greenhouse Strategy.

At the centre of these strategies is the investment of $800m to provide incentives for the development, commercialisation and deployment of greenhouse response technologies. Technology is going to have a critical role to play in reducing greenhouse gas emissions.

The Greenhouse Gas Abatement program is reducing Australia's net emissions by supporting industry and community activities that secure substantial emission reductions or substantial sink enhancement particularly for the 2008-2012 period. It is a competitive program aimed at large projects. To date we have invested $150m for projects in energy, transport fuels, mining, industrial processes and agriculture. This cross sectoral program is supported by other major initiatives.

The Greenhouse Challenge Program in place now for close to seven years has more than 700 companies and organisations as members. They take on voluntary challenges to reduce their greenhouse profile - and undertake through a formal agreement to actions and reporting on their progress in achieving emission reductions.

The Greenhouse Challenge program already has excellent coverage of key sectors, including 100% of aluminium and cement production, 98% of oil and gas and 91% of coal mining.

A 1999 evaluation of the program found that it was highly effective in achieving emissions abatement and in building the capacity of industry and government to monitor, manage and report greenhouse emissions. Since 2000 these emissions savings have been subject to independent verification.

Greenhouse Challenge is now complemented by a voluntary certification and labelling scheme to engage consumers. The Greenhouse Friendly label can be awarded to products or services where the provider has invested in abatement projects that offset the greenhouse emissions produced during the life, cradle to grave, of the product or service. Before the Australian Greenhouse Office awards the certification all emissions and abatement actions are reviewed and verified by an independent party. I am pleased to say that British Petroleum was one of the first companies to qualify products for award of the Greenhouse Friendly label.

We also have a range of programs, such as Cities for Climate Protection, Household Greenhouse Action and International Greenhouse partnerships that work across all sectors. Over 150 cities with nearly 60% of our population have signed up for the international cities for climate protection program - the highest rate in the world.

In the energy sector we have driven a more rapid take up of renewable power through creating demand and supporting technology development and commercialisation.

Under our Mandatory Renewable Target legislation we have established a requirement that will lead to Australia meeting over 12% of its electricity needs from renewable sources by 2010. This is a 60% increase above 1997 levels of renewable energy generation and will meet the domestic energy needs of 20% of our population. By allowing for tradeable renewable energy certificates under the legislation we have created perhaps the first market in the world dedicated to searching for efficient renewable energy sources. Beyond the mandatory scheme many Australians voluntarily take up green power options. These efforts are underpinned by a national greenpower accreditation program so that consumers can be confident that claims made by power retailers are genuine.

To support these measures that will drive demand for renewable energy, Australia has committed approximately $390m to boost the commercialisation, deployment, quality and reliability of renewable energy technologies. The projects supported range from the deployment of renewable energy sources in remote communities (which has great potential for many developing countries) to the commercialisation of cutting edge photovoltaic technologies.

To support energy efficiency Australia has introduced minimum energy performance standards to cover progressively a wide range of domestic appliances and commercial and industrial equipment. This is complemented by generator efficiency standards, a best practice program applying to all significant fossil fuel driven generators as well as energy efficiency standards for domestic and commercial buildings.

All of these approaches, and more, will be considered by an independent Review of the Energy Market commissioned by the Australian federal and state governments. One of the priority issues for the review will be to assess the relative efficiency and cost effectiveness of options to reduce emissions from the electricity and gas sectors.

Similarly in transport, in fostering the sequestration of carbon in forests and other sinks, in capturing fugitive emissions from mining and land fill, and in agriculture we have a range of programs in place or under development.

And we have invested in developing a world class National Carbon Accounting System. This enables us to track accurately changes in carbon stocks as a result of land clearing and reafforestation. Australia has great potential for sinks investment and land clearing caused a large part of our emissions in 1990 so in determining how we can meet our target of 108% it is important to know what changes in Kyoto relevant forest cover have occurred, and will occur in the time ahead.

While we are proud of what has been done over the past five years, we are not complacent. There is a large task ahead of us. The Australian economy has been the star performer of the OECD over the past decade. That growth has brought with it significant increases in emissions from the stationary energy and transport sectors. However, after carefully analysing the fully integrated carbon accounts linking emissions from land use change and sinks using the Kyoto Protocol rules with the emissions from other sectors, I am optimistic that with careful additional measures we can achieve our target while maintaining strong economic growth.

I have taken the time to spell out this background on Australia's domestic measures because it is essential to understanding the context in which the Prime Minister announced to the Australian Parliament that on current settings it was not in Australia's interests to ratify the Kyoto protocol. The Prime Minister announced that:

"because the arrangements currently exclude- and are likely under present settings to continue to exclude -both developing countries and the United States, for us to ratify the protocol would cost us jobs and damage our industry." (Hansard. Wednesday, 5 June 2002 REPRESENTATIVES P 2825)

Australia has from the start negotiated in good faith to develop an effective global response to climate change. It was therefore with regret that we concluded the Protocol did not at this time provide that framework.

Nevertheless Australia remains committed to develop and invest funding in programs to meet the target it agreed at Kyoto. That target is on a par with the targets taken by other industrialized countries under Kyoto in terms of the economic adjustment required.

So why would Australia not ratify the Protocol if it still intends to meet the target? Doesn't it cut us off from the opportunities symmetrically to trade emissions entitlements with the Kyoto Family?

The answer is straightforward.

The Kyoto Protocol will make only a modest contribution to reducing the growth of global emissions because, even as a first step, it does not provide a clear path towards developing country commitments and the United States has indicated that will not ratify. If Australia were to ratify in these circumstances it would be signaling a willingness to assume legally binding commitments under a treaty that falls far short of the global framework that is needed to be environmentally effective.

It has always been Australia's position that climate change is important and that it must be tackled in a way that is fair and economically efficient and therefore encompasses all the major emitters. And I do not need to remind this audience that developing country emissions will soon surpass those of Annex I countries. The Kyoto Protocol, on its current settings, fails that test.

If Australia were now to abandon that long expressed and clearly articulated test it would send a signal to investors. The signal would be that Australia was prepared to expose itself to binding legal commitments that could in the future impose costs not faced by its neighbouring regional economies. Investors would see that as a sign that if they support industries and projects in our country they could face uncertain and costly penalties that they would not face elsewhere in the region.

For Australia this is not a trivial matter. Foreign direct investment in greenhouse intensive industries such as natural gas, alumina and aluminium production, coal and metals processing is of great significance to our economy.

These investments are made on the basis of long run factors.

Australia has great advantages, particularly the sophistication of its workforce and information technology, telecommunications and computing infrastructure and the stability of its governance. Among these advantages is an expectation that the Government will act consistently and in a way that will not expose investors to costs and risks that they will not face elsewhere in the region. That is an advantage we will not abandon. Otherwise strategic international investment in Australia's resources sector could go elsewhere with significant consequences for jobs, prosperity and our rural and regional areas.

So, where to from here?

Domestically we are in the process of examining options for our forward climate strategy. In a sense, putting the debate over the ratification of the Kyoto Protocol to one side at this time has enabled us to concentrate on the real issue which is how to position the Australian economy to participate in, and respond to, an effective, sustained and therefore genuinely global climate response.

We will be focusing on not just the next few years, but with a ten, twenty, thirty year time horizon.

We will be aiming to build on Australia's competitive strengths with a lower greenhouse signature.

We will be looking at sensible adjustment paths that recognize existing capital stocks and allow the development and deployment of the new technologies at a responsible pace, and in a way which does not expose Australian industry to costs its competitors do not face.

And all this will be against the background of the working hypothesis, as the IPCC has suggested, that to limit greenhouse gas concentrations in the atmosphere to acceptable levels will require the stabilisation and then the substantial and continuing reduction of global emissions as the decades of this century unfold. While early action is important, the big gains will only happen as appropriate technology comes into place and as we find ways for developing countries to achieve prosperity without replicating the emissions intensive growth path of Annex I countries.

Internationally we will work hard to build an effective and genuinely global regime.

To achieve that objective a critical issue remains a pathway leading to commitments by key developing countries. Progress on this issue will define our capacity as a world community to address climate change.

The major stumbling block seems to have been the view that the requirement for developed countries to take the lead in combating climate change somehow prevents us from talking about how developing countries will follow that lead.

If developed countries must lead on emissions reductions - and I have outlined already how Australia is doing that - then developing countries must join us in a dialogue that delivers a framework for action by all major emitters.

Unless the EU - a very influential voice in the international negotiations - takes this up as an active agenda there is little prospect of developing an effective and longer term international regime. Australia looks forward to working with members of the EU to achieve this shared goal.

It is also crucial in such a far reaching and long term process that all participants are confident that the time path and process for abatement of greenhouse gas emissions is economically responsible-and this must include the United States, the largest emitter. That means that international arrangements must allow time and provide incentives for the development and diffusion of key technologies. Only science and technology offer the prospect of stabilising greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous interference with the climate system.

To these ends Australia will continue to play an active role in negotiations associated with the Protocol and whatever instruments follow it in 2012 - I would remind you that under the terms of the protocol these negotiations start in three short years from now.

But while we are working on the conditions that would allow us to join the Protocol or any subsequent framework that is developed, we will also be very active in pursuing international partnerships for practical action - not as an alternative to the Kyoto Protocol, but to encourage dialogue and real greenhouse emission reductions.

I was pleased to announce together with Under Secretary of State Dobriansky last week in Washington 19 projects for practical action under the US-Australia Climate Action Partnership. These 19 projects are grouped under five key areas:

An important part of this partnership is the work on registries of, and accounting for, emissions. This is a much broader issue than just between Australia and the United States. It is clear that for some time ahead we will have Kyoto and non-Kyoto countries. It is vital that accounting arrangements minimise the costs for companies operating across these systems. It is equally important that development of separate accounting arrangements does not inhibit progress towards a global framework. Joint work on accounting arrangements can support transparency at the level of both industry and governments.

We are working to develop a similar program of practical collaboration on climate change with Japan. We see mutual benefit in similar arrangements with the UK and other EU countries.

Responding to our planet's ever changing climate, and in particular reducing the impact of our societies on global warming, will be a substantial challenge for the 21st Century as we work to put our nations and our globe on a sustainable basis. There will be stutters and false starts and we will not always agree on specific steps and processes to achieve this, but if we all work to achieve a genuinely effective and genuinely global and coherent response to climate change, then the prospects of success are good.

Commonwealth of Australia