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

Opening Address
Beyond Kyoto: Economic Impacts and Alternative Mitigation Strategies Conference
Institute of Public Affairs
Melbourne
28 February 2003

(Check against delivery)

Australia's Approach to Climate Change


Introduction

Since 2001 Australia has endured one of the most severe droughts in the last 100 years. The drought has directly affected our farmers and rural communities, and the economy generally.

The higher temperatures and the extremely dry conditions have also contributed to the extreme bushfires across south-east Australia - sadly with loss of life and hundreds of millions of dollars worth of damage to and loss of property.

Of course, such extreme weather events are not new to Australians. As the world's driest inhabited continent, Australia experiences large year to year variations in rainfall with droughts, floods and bushfires as periodic occurrences.

But the severity of recent events has brought home once more the vulnerability of this country to climate and climate change.

The Bureau of Meteorology has concluded that the more severe impact of the current drought arises from the relatively higher temperatures during 2002 compared with earlier droughts such as those of 1982 and 1994. Their figures show temperatures during 2002 were 1.22C higher than the long-term average, compared with the previous record of 0.91C. This illustrates that even very slight increases in temperature put great pressure on our communities and producers, our ecosystems and species.

Moreover, our own data show that there are measurable long-term trends in Australia's climate, both nationally and regionally. Australia-wide temperature records show a warming of about 0.7C since 1910. The warmest year on record was 1998. 2002 was the fifth warmest year on record. Since 1910, South-west Western Australia has become 25per cent drier in winter, with annual rainfall well below 1960 levels.

Globally too, the best data we have show that climate change is a reality, with surface temperature having risen by over 0.6C since 1900. Global sea level has risen between 10 and 20 cm during the last hundred years.

The world is warming, and a warmer world is going to impact on many aspects of our lives, including our occupations, industries, and the risks we face.

A warmer world will mean even greater pressure on our scarce water resources. Dryland wheat cropping in south western Australia, pasture and grazing systems in high rainfall and rangeland areas, and fruit trees requiring winter chilling, will all be under pressure in a hotter world. Recent warm years have already been associated with the spread of insect pests, disease and weeds. On the other side of the ledger, some wheat yields may actually increase in regions where rainfall is projected to increase, or where decreases are small, due to the compensatory fertilisation effect of increased carbon dioxide. Urban and coastal communities may face increased storm intensity, sea level rise and flooding.

As I discussed at the Living with Climate Change Conference last December, adaptation will allow the costs of climate change impacts to be minimized and any opportunities and benefits to be realized. It is therefore important that we move to address the information gaps and uncertainties that exist around potential climate change impacts on Australia and the adaptation tools and options available. In recognition of this, the Government announced in August last year that as a first step research will be undertaken to improve our understanding of likely impacts from climate change, and on adaptation options. This is an imperative.

Although there is much that we still need to learn about the world's climate system, there is general agreement that a principal mechanism leading to global warming is the greenhouse effect, arising from increasing atmospheric concentrations of greenhouse gases - chiefly carbon dioxide, methane, and nitrous oxide.

Getting the Climate Science Right

There remain of course scientific arguments about the precise operation of the world's climate system, and it is important that we refine our knowledge so that we can develop our responses, both adaptive and preventative.

Australia is already making significant investment in climate science, both independently and in partnership with other countries.

Our Antarctic programme has, as one of its key elements, research into the history of the world's climate and the role of the Antarctic ice sheet and the Southern Ocean in the climate system. Through the Climate Action Partnership I announced with the United States in March last year, we are working on improving our understanding of the role of Australia's oceans in affecting climate, and on monitoring changes in the oceans that may be attributable to longer term climate change.

It is important not only to get the science right, but also to continue refining the models that provide us with projections about the likely dimensions of climate change over the coming century under various scenarios.

The key models and scenarios underpinning climate policy are those of the Intergovernmental Panel on Climate Change. They project globally averaged surface temperature to increase between 1.4C and 5.8C over the period 1990-2100. Inevitably there will continue to be debates about these scenarios. I am aware of the criticisms of our own Ian Castles, the former Australian Statistician and a former head of the Department of Finance, which have been brought to the IPCC's attention by John Zillman, the Director of the Bureau of Meteorolgy.

Mr Castles has a distinguished career dealing with issues of economic growth. He has raised a number of issues in relation to the methodology used by the IPCC in its Special Report on Emissions Scenarios, a key assessment of future economic paths and associated emissions scenarios through to 2100. He is with us today and I am sure he will relate his concerns over the accuracy of the projections.

From a government point of view, I am happy to report that the IPCC has extensively discussed Mr Castles' criticisms, as recently as last week in Paris. The IPCC is continuing consideration of these issues as part of its preparation for its fourth report assessing the state of knowledge of climate change.

Australia's key objective is to ensure that understanding of the threat posed by climate change is based upon sound analysis and sound science. Global climate change is a serious issue, and Australia is keen to ensure continued and enhanced high standards of scientific integrity, credibility and usefulness of the IPCC as the authoritative international source of advice on climate science.

Australia's approach to climate change, including our active domestic policy response, is based upon the reality that climate change is occurring - but not any presumption about precise temperature rises.

One thing we do know for certain is that even slight increases in temperatures can have major consequences for Australia, especially in certain regions. If the world's nations are to address the greenhouse effect, and human society's contribution to global warming, then only a global response can be effective. Australia's contribution to global greenhouse gas emissions is of the order of one percent. Unless the world's major emitters of greenhouse gases are part of the solution, then the future looks grim.

The message then is clear - climate change is, and will continue to be, a major issue for Australia. The question is not "Will the climate change?", but rather "How will it change?" and "What can we collectively do to reduce the threat?"

Australia's Climate Change Strategy

Australia needs to deal with the issue of climate change both domestically and internationally. At home we need to ensure that we take appropriate action to mitigate whatever contribution we may be making to climate change, and put ourselves in the best possible position to adapt to the changes which are already inevitable because of the longevity of greenhouse gases in the atmosphere.

Internationally, we need to work to put in place a global framework that includes all major emitters, and to bring about the greenhouse reductions necessary to restrain climate change.
Australia has a dual economic exposure to climate change.

On the one hand, parts of our economy are highly dependant on ecosystems and natural resources that are vulnerable to climate change.

On the other, important parts of our economy with a competitive advantage, such as energy and aluminium production, are currently high greenhouse emitters, and could be exposed to mitigation measures we put in place in moving to a lower greenhouse signature.

We need to carefully manage both sides of this exposure to satisfy our objectives of sustaining our environment and continuing economic growth.

In relation to mitigation of greenhouse gas emissions Australia has been at the forefront of international efforts to reduce greenhouse gas emissions from their projected path. The government has committed nearly $1billion to provide incentives for industry and communities to reduce their greenhouse gas emissions, and to encourage the development of low emission technologies. Both sectors have responded strongly. We established the world's first national agency, the Australian Greenhouse Office, devoted specifically to tackling greenhouse gas emissions.

The measures we have put in place will already produce a reduction in greenhouse gas emissions of some 60 million tones CO2-e a year by 2010 - equivalent to taking all Australia's cars off the road.

Already there is evidence of Australian success in decoupling economic growth from greenhouse emission growth. Our most recent national inventory showed Australia's greenhouse emission grew by 2.1 per cent in 2000, while the economy grew by 4.3 per cent. Emissions per dollar gross domestic product (GDP) are 24 per cent lower in 2000 than in 1990.

Australia's greatest challenge lies in the energy sector. 55 per cent of Australia's greenhouse gas emissions are attributable to the stationary energy sector. The challenge is to increase the efficiency of the existing generation technologies while introducing new cost effective greenhouse friendly replacement technologies. Transport accounted for 14.3 per cent of Australia's total greenhouse gas emissions in 2000 and had the second largest percentage increase in emissions (24.2 per cent), after stationary energy, of all the sectors in the decade to 2000. The challenge is to replace high emission fuels with lower emission alternatives and replace and encourage the up-take of new, more fuel efficient technologies.

According to the Electricity Supply Association of Australia, around $5 billion of investment in electricity generation is expected by 2010.

Reduction of emissions from energy is a particular challenge for Australia because we have a very energy intensive economy and our international competitiveness lies to a significant extent in the low cost of energy in this country, resulting from our huge reserves of coal and gas in particular. Our emissions per capita are relatively high because we do not have the extensive hydro resources of many other countries, such as Canada, and we have taken a firm national decision not to develop nuclear power. If Australia had used nuclear power to same extent as the EU (where it provides 14 per cent of total energy consumption), Australia's emissions in 2000 would have been 4 per cent below our 1990 level.

In addressing the issue we therefore need to make sure that responsible action on greenhouse is combined with a strategy and policy framework that maintains to the maximum extent possible our competitive advantage.

Australian industry has a high level of awareness of these issues. Ian Macfarlane, Minister for Industry, and I are currently engaged in a major consultative effort with Australian industry and environment organizations to ensure that the most appropriate long term framework for greenhouse gas abatement is put in place. It is that long-term framework which will provide the investment security necessary for our energy future, and the Prime Minister has established and will chair a special ministerial committee to consider the key decisions for Australia's energy future.

We are already seeing progress. Fourteen generating companies have signed up to the Government's Generator Efficiency Standards (GES) program. This represents the majority of Australia's 18 medium to large generators with companies that have not yet signed committed to doing so. With coverage of around 85 per cent of Australia's electricity generating capacity, the GES program is having a strong influence on emission reductions from fossil fuel electricity.

Many companies are already making decisions to convert to lower emission energy sources and cleaner technologies. Companies such as EDL, Nabalco, Queensland Alumina, BHP Billiton, Origin Energy, Envirogen and others have all been encouraged by the Greenhouse Gas Abatement Programme to take sensible and responsible action, with significant greenhouse abatement results.

It is worth making the point in this context that Australia not only has vast reserves of low-cost coal and lower-emitting natural gas. We have immense potential for renewable energy - such as solar and wind power. We also have an inventive spirit and record of excellence in research that are far out of proportion our size. Through the Renewable Energy Commercialisation Programme, and the Mandatory Renewable Energy Target the Government has encouraged a veritable explosion of opportunities in the renewable energy area.

Because of the Howard Government's MRET programme we will see wind farms in every Australian state supplying some 250,000 MWh of power annually. Last December there were 3,767 photovoltaic systems in households and community buildings to generate their own electricity from sunlight, with another 1120 awaiting installation. Many other sources of renewable energy are under active investigation and development, such as wave power, geothermal energy and tidal power.

I mention briefly Energetech Australia's commercially efficient ocean wave power plant on the breakwater at Port Kembla, Origin Energy and the Australian National University's a solar energy home heating system offering consumers a low cost, greenhouse friendly alternative to gas and electric home heating systems, and RMIT University, Geo-Eng Australia and Pyramid Salt's 3,000 square metre solar pond in northern Victoria for the commercial production of salt, using solar power instead of fossil fuel. Under the Remote Renewable Power Generation Program, remote communities have installed 1,042kW of photovoltaics, 75kW of wind turbines and 17kW of micro-hydro and associated enabling equipment reducing greenhouse gas emission by approx 7,000 tonnes per year.

I make these points to emphasise that the Government is committed to Australia making its appropriate and responsible contribution to greenhouse gas reduction, and that this year will see key decisions being made that will provide a framework for action well beyond the Kyoto commitment period.

As a result of the kind of actions I have mentioned Australia is within striking distance of achieving the target of 108per cent of 1990 emissions negotiated at Kyoto. For the reasons I have mentioned above, this was a challenging but fair target. In 2000, Australia's greenhouse emissions stood at 105 per cent of 1990 levels. On current policy settings, Australia is projected to reach around 111 per cent of 1990 emission levels by the end of the decade. It is the Government's intention not only to meet the Kyoto target, but more importantly, to put in place the longer-term framework that will enable continuing reduction of emissions in the decades beyond.

The truth is that Kyoto itself will achieve little. 75 per cent of global emissions are not covered by Kyoto. It is estimated that Kyoto will probably reduce global emissions by around one per cent by the end of the first commitment period. This compares with a need, on the best science currently available, to reduce global emissions by some 60 per cent by the end of the century. Clearly this, rather than Kyoto ratification, is the important issue.

This explains why the Government has decided that it is not in Australia's interests to ratify the Kyoto treaty at the present time. Developing countries, whose emissions will exceed those of the developed world in this decade, currently have no legal obligations of the kind imposed on developed countries that ratify, and the United States administration has made it clear that it has no intention of ratifying the treaty.

It is a serious weakness of the existing arrangements that there is currently no pathway for the involvement of developing countries.

If Australia were to ratify, Kyoto would create obligations for Australia that are not imposed on many of our regional trading competitors. If these arrangements continued over the longer term, industries could be driven overseas by competitive pressure to countries that might not have as stringent environmental standards as Australia. Such a situation would mean an increase in global greenhouse emissions, not the reduction we are all seeking.

If Australia were to ratify today, we would be sending the message that we were prepared to impose legal obligations and significant costs on our industries that they may not face in the longer term if they were to transfer their operations to countries which have rejected such obligations, and which for the most part have so far shown no interest in moving to such a regime post-Kyoto. We are not prepared to start shipping Australian industries and jobs overseas, even though some of the States are apparently prepared to do just that.

Australia needs an effective global response

If the Kyoto Protocol in its present form is not in the national interest, an effective international response to climate change certainly is. The Howard Government is actively engaged in international forums and with major strategic and trade partners to address climate change.

A key challenge then for Australia and the international community is to define what an effective global response should look like.

A global response to climate change beyond Kyoto raises numerous questions as to the nature of a truly effective international response, and the most appropriate processes for achieving it.

Today's forum is an important opportunity to consider these and other issues - to tease out constructive ideas for Australia and for the international community to pursue.

There is a range of options being discussed internationally, including some to be put forward today. And, of course, many of the views will be different to those of the Government - but I welcome and look forward to constructive debate and discussion on these issues.

Australia is strongly of the view that future global action needs to reflect the different circumstances, the different economic and social needs, and the different priorities of countries. That was the position Australia successfully pioneered in Kyoto - and it remains our position today.

Many products are produced in Australia with more attention to environmental impacts than they frequently are overseas. From a global point of view, it is better that they be produced in Australia than somewhere else. The recent $25 billion LNG contract with China illustrates the point nicely. The contract will add around one million tones of CO2 annually to Australia's emissions, but by replacing coal fired power in China it will reduce China's emissions by around 7 million tones a year - a substantial net gain for global emissions.

There is no doubt that as our technology improves Australia's greenhouse gas intensity will reduce. On present measures we will see a reduction by 2010 of some 39per cent of 1990 levels - this in a 20 year growth period that will probably exceed any other in our history.

Equally, we need to recognize that we are increasingly exporting in a world market which is less and less carbon tolerant, and which will become more reluctant to buy products which do not have better environmental qualities.

While renewable energy will play an important role in the total energy mix in the years ahead, it is equally true that - on any scenario suggested - fossil fuels will continue for some time to provide the main sources of energy for power and transport. And, as I mentioned earlier, it is on these cheap fossil fuels that Australia has built significant elements of its industrial base.

It is for this reason that the government is placing considerable importance on encouraging technologies that hold out the prospect of cleaning up the emissions from fossil fuels. The technologies of promise here are particularly coal gasification combined with the sequestration of carbon dioxide in underground strata and aquifers.

You may have noticed that in the last round of grants to Co-operative Research Centres $21.8 million was provided for new Co-operative Research Centre on CO2 that will build on work already carried out to place Australia at the leading edge of geo-sequestration technology. This is also being pursed through our Climate Action Partnership with the United States. Real progress is being made through the Partnership in forging links and exchanging knowledge in the areas of clean coal technology and carbon capture and storage. A highlight has been the joint government and industry mission to the US and Canada in October last year that showcased the latest technologies in these areas and laid important groundwork for joint projects.

An Australia-United States business technology workshop, scheduled for mid-year, will be a major milestone for the Partnership, facilitating high-level engagement between businesses and government agencies in our respective countries.

Australia is at the leading edge of geological sequestration efforts and we are continuing to advance this work.

Beyond such developments, of course, beckons the longer term prospect of the hydrogen economy, and this too is an area where Australia can contribute, and where our long term energy strategy will play a critical role

Involving Developing Countries in Emission Reduction

Any effective global climate change framework must involve developing countries. Yet is plain from COP8 in New Delhi last November that many developing countries are very reluctant even to discuss the framework that must come into place after 2012.

This is not to say that China, Singapore, India and others are not taking action to reduce their emissions. They have strong air quality as well as climate reasons for doing so, and Australia has already benefited significantly from this policy direction, as in the LNG contract with China.

It will be very important to find the ways for developing countries to achieve strong economic growth without replicating the emissions intensive growth path of developed countries. Or putting it another way, to reduce emissions without reducing economic growth rates.

From the Johannesburg Earth Summit last year the energy message was clear. While there is global interest in progressing renewables, the cost factor inevitably means that it will be fossil fuels that bring energy to hundreds of millions of people who presently rely on burning wood, dung and other biomass in the next few decades.

In this context I note the Greens' opposition to the Australian export of clean coal power station technology that calls into question not only their environmental but their social justice credentials.

We have significantly increased the level of our climate change-related financial assistance to developing countries and substantially increased our annual contributions to the Global Environment Facility. We have pledged to provide $68.2 million for the third replenishment period, a substantial increase of more than 58 per cent over the funding our previous contribution - the highest increase of any country.

Around 40 per cent of this funding will support projects addressing climate change including the Pacific Islands Climate Change Assistance Program.

Australia's bilateral and regional assistance to Pacific related activities totals around $18 million with expenditure in 2002-2003 estimated at $5 million. These projects will assist Pacific island countries vulnerable to the adverse impacts of climate change and climate variability and improve climate prediction services in the Pacific.

Increasingly, technology will play a key role in enabling countries to make a smooth transition to lower emission economies. But, for countries like Australia, with important export-oriented industries that are currently high emitters, we need to ensure that the future global response drives technology change at minimum cost to industry - both in terms of capital investment and international competitiveness. And we need to ensure that with pending global technology changes Australia is proactively positioned to capture major business opportunities.

But we must also continue to assist developing countries in building their capacity to respond to climate change - both in terms of mitigation and adaptation - by accelerating the transfer of environmentally sound technologies.

Partnerships between government and industry can play a valuable role in achieving this, and it was this recognition that lay behind many of the initiatives coming out of the World Summit on Sustainable Development in September last year.

Energy for Sustainable Development

One such partnership initiated by the Australian and Mexican Governments, to be implemented through the APEC Energy Working Group, will promote clean and efficient technologies, and the efficient use of energy to achieve both economic gains and environmental enhancement.

The Global Partnership toward Cleaner Fuels aims to combat air pollution in developing countries by phasing out lead in gasoline, reducing sulfur in diesel and gasoline and may provide cleaner fuel provision for the reduction of greenhouse gas emissions.

These partnerships symbolise what we in Australia value - working together in practical ways to achieve on-the-ground outcomes.

Under the Clean Development Mechanism, developed countries (through corporate entities) are able to fund emission reduction projects in developing countries and use the resulting Certified Emission Reductions (CERs) to meet part of their Kyoto target.

In addition to producing a global environmental benefit through greenhouse gas mitigation, CDM projects provide social and economic benefits to the host country through sustainable development, and through technology transfer assist in building the capacity of developing countries in mitigation and adaptation action.

Australian companies are well placed to provide leading edge greenhouse technologies and expertise. Business can contribute to climate change action in developing countries and assist in the transfer of technology, and Australian companies have the capacity to provide leading edge climate change-related edge technologies and expertise to such projects.

We must sustain the effort to enable developing countries to accept future commitments with a degree of comfort and ownership - a sense that in a fair and appropriate way they are sharing in the global solution to a global problem.

So where do we go to from here?

I have already mentioned the practical objectives we have set for our bilateral initiatives. We also remain fully engaged in the multilateral processes. I expect to lead an active and influential Australian delegation to COP9. It may be that the Kyoto Protocol has entered force by then. That will not attenuate our efforts in any way. We will continue to make a singular contribution towards the evolution of an effective global response to climate change.

Australia needs a longer-term domestic response

The shift to a longer-term lower greenhouse signature will require government, business and the community to think beyond Kyoto to approaches delivering structural and technological change over the next 20 to 30 years.

For Australia, too, strategic investment in technological innovation will be important to maintain the competitiveness of, and reinforce structural change within, the Australian economy.

Structural change and investment in new, less greenhouse intensive capital equipment will also lowering our emissions footprint. Investment cycles being rather lengthy, this change will be gradual. The challenge will be to find the most cost-effective mechanisms to drive us along the pathway of a sustainable future and provide the signals that will give direction and security to the massive energy generating investments that must take place. We are looking to the Parer Energy Market Review and the Prime Minister's Energy Taskforce to inform us of solutions that will enable us to deliver abatement, maintain our security of energy supply, use our natural resources more efficiently, and invest in the next generation of energy sources while continuing to grow the economy.

Conclusion

In conclusion, I look forward to hearing from the participants at this conference your constructive ideas and concrete proposals on how best Australia should move ahead with future international and national action on climate change.

Related Information

Commonwealth of Australia