Australia’s greenhouse policy

The Intergovernmental Panel on Climate Change (IPCC) was established in 1988 by the World Meteorological Organization and the United Nations Environment Programme. The IPCC is charged with investigating and reporting on global climate change and concludes that average global temperatures have increased by 0.6o C (+ or – 0.2o) in the 20th century (IPCC, 2001a:4)

Given that global economic growth based on carbon fuels is set to continue, the question is what will be the greenhouse effect on the world’s climate in the future. The ‘best estimates’ of the IPCC are for a 2o C rise in temperature – but ranging from a low of 1.4o and a high of 5.8o by 2100 – coupled with a sea level rise of 0.09 to 0.88 m for 1990 to 2100 with a central value of 0.48 m. (IPCC, 2001a: 7,8) It is important to note that these are ‘projections’, based on a doubling of CO2 in the atmosphere by 2100 , they are not ‘predictions’ that foretell the future.

The sea level has risen in the last century by between 10cm and 25cm due to expansion of the earth’s oceans, together with the melting of ice caps. The estimate of sea level rise is more uncertain than are temperature increase estimates because the oceans will take a long time to absorb the extra warming generated in the atmosphere. What is known is that the slow absorption of heat will cause the oceans to go on rising for centuries, even if international measures are taken to curtail global greenhouse gas emissions.

Sources of greenhouse gases

The industrialised nations are responsible for most of the historical and contemporary emissions of greenhouse gases. Theirs will remain the major contribution to the accumulated stock of greenhouse gases in the atmosphere for decades into the future, despite the increasing rate of emissions from developing countries. The U.S. is the major contemporary source, contributing over a quarter of emissions. The former Soviet Union is a large emitter at two-thirds that of the U.S. Of the non-industrialised nations, China’s and India’s contributions together amount to about half the U.S. output, but their shares and the share of the rest of Asia are increasing – for example, China is projected to be the equal of the U.S. by 2015. Many non-industrialised countries will remain minor contributors to emissions because of their small economies and low economic growth rates. The whole of Africa is expected to increase its emissions by 50 per cent to the year 2015, but its share of global emissions is projected to fall to only 3.3 per cent (Energy Information Administration, 1996:1)

Australia is responsible for only 1.5 per cent of total greenhouse gas emissions from industrialised countries. However, its output is only slightly less than that of much larger European countries with many times the population. For example France emitted only 10 per cent more carbon dioxide, the main greenhouse gas, than Australia in 2000 but has three times the population. Australia relies on fossil fuels for its energy, unlike countries such as France that generate a large percentage of their electricity from nuclear power. It is also heavily engaged in energy intensive industries such as metal smelting, and in recent years has had comparatively high economic growth. As result, Australia is the second greatest emitter of carbon dioxide per head in the world, surpassed only by the U.S. Australians averaged just over 18 tonnes of CO2 per head in year 2000, compared with 20.5 for the average American. A summary of CO2 emission levels in Australia and the U.S. is given in Table 1. Taking into account all greenhouse gases, including methane from agriculture, Australia has the highest per capita emissions of any country (Pollard, 2003).

A major reason why Australia is a leader in the emission stakes is that it still clears wooded land for agriculture. In 1990, 28 per cent of carbon emissions were generated by land clearing. Despite a decrease over the decade, 10 per cent of emissions were still generated by clearing in 2000 (AGO, 2002a) In contrast, as Table 1 shows, Americans reduced their emissions in 2000 by over 15 per cent through afforestation, and American levels of CO2 emissions per head increased by 5 per cent over the last 10 years while Australia’s grew by 18 per cent.

The costs of global warming

Before committing resources to reducing the effects of global warming it is first necessary to know something about the costs such warming generates.

The IPCC estimates the economic losses associated with a doubling of greenhouse gas concentrations, which would produce an estimated 2.5oC global warming, to be 1.5 to 2.0 per cent of global gross world product annually (IPCC, 1997:31). Gross world product is the sum of all countries’ gross domestic product (GDP), and in 1997 it was US$38,123 billion. Applying the 1.5 to 2.0 per cent range gives a global cost estimate for greenhouse of between US$572 billion and US$762 billion annually. (It should be noted that this loss in GDP is the loss incurred when greenhouse gases, in CO2 equivalent terms, have doubled in concentration in the atmosphere. In prior years, as the CO2 concentration is building, losses would be smaller.)

The costs of global warming will differ geographically, not only because of varying patterns of climate change but because some relatively rich countries will be able to reduce effects and future costs by taking early action, while poorer countries are less likely to be able to do so. The cost to developed countries was estimated by the IPCC to be 1-1.5 per cent of total GDP, and to developing countries 2-9 per cent of total GDP(IPCC, 1997:31). Given a total developed countries’ GDP of US$20,968 billion and a developing countries’ GDP of US$17,155 billion (International Monetary Fund (IMF) , 2000) cost of global warming is apportioned as follows:

a) developed countries US$210-315 billion, annually

b) developing countries US$343 – 1,544 billion, annually

These costs of global warming on the world economy were broadly agreed in estimates surveyed by Nordhaus (1994). However, the uncertainty inherent in these estimations is highlighted by the spread of results, which ranged from zero to 21 per cent. The costs of such effects as species extinctions and loss of human life are particularly difficult and contentious. Nevertheless, what seems to be clear is that the economic losses associated with global warming will be far greater for developing than for developed countries.

The costs to Australia and New Zealand have been similarly estimated at 1.2 to 3.8 per cent of GDP (IPCC, 2001b: 50). This equates to a cost to Australia of between US$4.9 billion and US$15.6 billion annually for a doubling of world greenhouse gas concentrations.

However, the above estimates of the costs of global warming are deeply qualified by the IPCC itself. Even for Australia – an OECD member – the IPCC admits that comprehensive cost estimates for climate change are not yet available (IPCCC, 2001b). Moreover, the costs are based on the impact of a doubling of CO2 concentrations on the present day economies, whereas in reality national economies will have grown considerably by the time CO2 concentrations double.

Another difficulty in costing climate change is how to value costs incurred many years in the future. Discounting (the inverse of interest), is the technique employed to take account of the fact that human beings put less value on future costs and benefits than they do on present costs and benefits. Even a modest discount rate of 5 per cent per annum reduces the present value of the cost to Australia of global warming in 100 years time to only US$0.04 -1.43 billion, compared with an undiscounted cost range US$4.9 –15.6 billion. This leads to the question of how much it is wise to spend now to avert global warming costs in the future. In economic terms, if the present value of future costs is discounted to insignificance then Australia can justify spending only modestly in the present to reduce those costs. Nevertheless, by signing the United Nations Framework Convention on Climate Change (UNFCCC), Australia has agreed to prevent dangerous human interference with the climate system.