Updated projections of global emissions and their drivers, in the absence of effective mitigation action, are provided in the Review’s Emissions Trends paper. The analysis shows that the global financial crisis and recession in the developed countries in the northern hemisphere did not succeed in giving the atmosphere a break. Despite a short-term dip in growth, the overall growth momentum for global carbon emissions remains almost the same. Global emissions would double between 2005 and 2030 under business-as-usual — this is a measure of the magnitude of the task ahead.
What has changed since the 2008 assessment is the distribution of underlying growth between the developed and the developing world. While Europe’s and America’s growth prospects have been dented, the outlook for rapid economic expansion in the developing world seems even better now than it did three years ago. China continues powering ahead, India is growing at a faster rate than was thought possible just a few years ago, and many other developing countries could follow, entering long periods of sustained fast growth.
Expectations of the future price of oil and other fossil fuels have been revised upward, with a flow-on effect of faster improvements in energy efficiency and a shift away from energy-intensive activities and goods. But this does little to change the overall picture which is dominated by strong economic expansion in the developing world. Under the new business-as-usual scenario, developing countries would account for 70 per cent of the world’s energy-related carbon emissions by 2030.
Actual carbon emissions will, in all likelihood, be substantially lower than in a business-as-usual scenario. That is because many countries have already got climate change mitigation policies in place, and Copenhagen Accord commitments by the major countries — crucially including China — implies substantial extra reductions below a no-action scenario. Countries’ pledges are unilateral and defined in different metrics, and there is no binding global agreement. But still, this new bottom-up approach to international climate policy may well result in substantial action.
The shift in global growth momentum to developing countries suggests, at first glance paradoxically, that developed countries cannot relax in their efforts to curb carbon emissions. Rather, achieving the same global outcome will require the rich world to go lower in their emissions, as the developing world takes up a greater share. This need not cost developed countries more than was anticipated before the global financial crisis, because the underlying growth momentum is less also. In other words, the same level of carbon policy effort in the United States and Europe will now result in lower emission levels than were anticipated in 2008 and earlier.
Australia is in an exceptional position as the only major developed country that escaped the 2009 recession, and with continued strong growth driven in part by mining and gas extraction. Without new policies, energy use and carbon emissions are on a strong upward trend, projected to rise to 24 per cent above 2000 levels by the government’s latest report. This will not serve as an excuse for Australia to go for a more lenient emissions target, but it will mean that additional policy effort is needed to achieve any given target.
In his paper on ‘progress towards effective global action on climate change,’ Ross Garnaut takes a close look at recent and prospective climate policy developments in key countries. He finds strong policy actions and commitments in China. China’s goal to reduce the emissions intensity of its economy by 40 to 45 per cent from 2005 levels by 2020 was ‘opposed by official advisers with responsibility for economic policy, on the grounds that they may be unattainable, or attainable only at unacceptable cost to economic growth,’ Garnaut reports. However, ‘once they had been accepted by the leadership, it became the responsibility of the economic officials to make sure that they were achieved.’ Regulatory approaches have dominated Chinese emissions reduction measures, with authorities closing or constraining energy and emissions intensive plants and industries, and giving fiscal support for renewable and nuclear power, improvements to the power grid, and expansion of high speed rail.
Garnaut reports assurances from top level US officials that the United States is still committed to a substantial emissions reduction objective, despite big political obstacles to early domestic action — notably the failure of proposed federal legislation for a price on carbon. The US commitment is supported by a fall in emissions since 2007 attributable to the recession; new large and cheap sources of gas that can replace high-carbon coal; a surge in investment in low-emissions technologies in response to support through fiscal stimulus packages; a greater role of the Environmental Protection Agency; state-based initiatives to establish emissions trading schemes and emissions-reducing regulations; and by uncertainty about future emissions constraints that have hampered investment in new coal-based power stations.
These international developments mean that the pressure is on for stringent domestic mitigation policies in Australia. Pointedly, Ross Garnaut stated that if Australia ‘ceased being a drag’ on international climate action, this would already be a significant improvement. Australia may be small but it is one of only a small number of significant developed country players in the global climate change arena, and what Australia does or does not do is noted internationally.
The Australian government, working through the Multi-Party Committee on Climate Change, is preparing for the introduction of carbon pricing as the central plank of mitigation policy. But investing in mitigation action overseas will very likely have to be part of the equation, if Australia is to meet a reduction target in its stated range between 5 and 25 per cent (at 2020 relative to 2000 levels). Other developed countries may also find that compliance with their national emissions targets requires the purchase of permits internationally. Typically permits would be sourced from developing countries.
Yet as the Garnaut Update notes, it is possible that there will be a ‘long transitional period before there is comprehensive binding international agreement.’ How can international emissions trading take place without a binding global agreement and without universal rules for international permit trading?
The answer may well lie in bilateral or regional trade. Arrangements between countries that have existing economic and political relationships, and that complement each other as prospective buyers and sellers of emissions permits, would be an obvious way to realise gains from trade. And Ross Garnaut argues that regional trading schemes could become much more than a stop-gap measure: ‘If carefully structured, they can become building blocks for a genuinely open global trading system.’
In the Asia Pacific region, a number of potential partners can be readily identified. Setting aside the United States and China, which at this stage seem more likely to pursue their own agenda, countries in the Asia Pacific that have pledged emissions targets under the Copenhagen Accord include Japan, South Korea, Indonesia, Australia and New Zealand. It would only be logical for these and other countries to explore the options for regional climate policy alliances.
Frank Jotzo is Director of the Centre for Climate Economics and Policy at the Crawford School of Economics and Government at the Australian National University. He advised the Garnaut Review 2011 Update on its papers two (international) and three (emissions trends).