Pressure for pledges

17 November 2014

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Frank Jotzo is Director of The Centre for Climate Economics and Policy at Crawford School, and director of the School’s Resources, Environment and Development program. He currently teaches the graduate courses Domestic Climate Change Economics and Policy and Issues in Development and Environment.

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Historic China-US deal puts pressure on other nations, including Australia, to come up with meaningful domestic policy action, writes Frank Jotzo.

The China-US climate deal is a breakthrough for global climate policy. Their commitments are consequential. And the fact that the major powers stand shoulder to shoulder means the pressure is on all other countries to come up with their own emissions pledges. Those pledges will need to be meaningful, and underpinned by domestic policy action. Australia will be in the spotlight.

For decades China and the US played the blame game on climate change. No more. What’s changed is that China accepts its natural global leadership position, including on climate change.

And Beijing no longer sees cutting carbon emissions as a burden on economic development. The Chinese leadership wants to move to a cleaner model of economic growth. The breakneck-speed expansion of heavy, polluting industry is no longer seen as desirable. China wants to make the transition to a high-income country, and promote high-value manufacturing and services.

Near term, getting urban air pollution under control is the order of the day. And China is also wary of importing too much of its energy - rising coal imports seem politically on the nose, as the re-introduction of coal import tariffs shows.

All that means China will cut back on its coal use by continuing the drastic increases in energy productivity seen over recent years and investing even more in renewable energy, as well as nuclear and gas infrastructure. “Peak coal” in China is likely this decade.

Obama meanwhile is keen to get a deal done on climate, so the stars are aligned. A deal at next year’s Paris climate conference will be part of Obama’s legacy.

The US commitment of a 26 to 28 per cent reduction by 2025 compared to 2005 means that emissions in the first half of the 2020s will need to fall by about 2.5 per cent a year. That is double the annual reduction rate from 2005 to 2020.

By comparison, Australia’s current target of a 5 per cent reduction from 2000 to 2020 means a reduction of just 0.25 per cent a year. Europe’s commitment is to reduce emissions by 40 per cent compared to 1990 levels. All countries are called on to put their national emissions pledges for the post-2020 era on the table early in 2015, to prepare for a new climate agreement at the Paris climate conference later in the year. The major powers have set the tone and the pace. There will be little room to hide for countries that would prefer to go slower or not act at all.

Much of the developing world will look to China in formulating their own targets.

China has pledged that its CO₂ emissions will stop growing by 2030. This is highly significant, as it is the first time China has committed to an absolute limit on its emissions, ditching its age-old position of needing to develop before considering limits on carbon.

We know first hand from our work with Chinese researchers and policy advisers that there has been an intense debate in Beijing about what is the right year for China’s “carbon peak”. Many analysts believe it could peak by 2025, if the policy effort is maintained. Some think it could even be by 2020. So the 2030 commitment leaves room to do even better in years to come.

Much depends on how fast China’s economy grows in years to come, and on the nature of that growth. If China is successful in a fast transition to clean manufacturing and services industries, earlier peaking is possible. China is committed to implementing a national emissions trading scheme, following on from the seven pilot schemes (covering 250 million people) already in operation. Together with market reform in the energy sector, this will help drive down emissions in an efficient way.

A crucial variable that China has been silent about so far is how far annual emissions will rise before they peak. Some analysts have been extrapolating the growth rates seen during the last ten years. That is a mistake. The growth in China’s CO₂ output has slowed down significantly since 2011, and there is every reason to believe that it will continue to slow down.

At the G20 talks in Brisbane, climate change will now be front and centre - which is quite ironic given the strained efforts by our government to keep it off the agenda. And so it should be, because dealing with climate change is an economic issue at its heart. If the world fails to cut emissions, future economic prosperity is at risk. And in tackling the problem, there are opportunities for growth in new industries, just as there are pitfalls in using the policy approaches.

G20 countries account for about 80 per cent of global emissions. According to numbers compiled by the Global Carbon Project, the emissions growth rates and the per capita emissions levels of G20 countries are also higher than in the rest of the world.

Australia, as the host, will have a hard time justifying its current policy settings. Just last month, at the UN Climate Summit in New York, Foreign Minister Bishop emphasised the 5 per cent target and the fact that the government got rid of the carbon price. Internationally, the former is seen as completely inadequate, and the latter as a major retrograde step.

And all that when Australia could prosper in a low-carbon world, based on our huge potential for renewable energy, carbon sequestration on the land and the traditional flexibility of our economy. But governments will need to facilitate the transition, not try to stem the tide.

As Ross Garnaut has noted, Australia’s climate policy right now is “up shit creek”.

Today’s statements by Ministers Bishop and Hockey seem to indicate a change in the government’s stance. In an interview this morning, Hockey welcomed the “historic agreement” and would not comment on the adequacy of direct action. Bishop said the government is reviewing Australia’s post-2020 position with a view to a “considered response” to the China-US deal.

Perhaps there’s a chance we’ll get some way out of the depth of that creek after all.

This piece was first published in The Age: http://www.theage.com.au/comment/climate-change-squarely-on-g20-agenda-a...

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