Finance Alan Kohler: The Coalition’s climate change argument is really just about freeloading

Alan Kohler: The Coalition’s climate change argument is really just about freeloading

Treasurer Scott Morrison hands Deputy Prime Minister Barnaby Joyce a lump of coal during Question Time in the House of Representatives at Parliament House in Canberra, Thursday, Feb. 9, 2017
Global warming is already costing us plenty, writes Alan Kohler. Photo: AAP/TND
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At the heart of the Coalition’s problem with climate change is that they’ve told Australians that dealing with it will be cost free.

It’s not true.

What it really means is that Australians are being told they can be freeloaders.

The International Energy Agency says it will cost the world $US5 trillion a year by 2030, of which Australia’s share, based on GDP, would be $110 billion a year, about three times the current defence budget … if we spent it, that is, and weren’t freeloaders.

The point about reducing emissions to (net) zero by 2050 is that it will cost much less than the alternative, which is allowing the planet to heat up by more than 1.5 degrees.

Politicians around the world, not just here, are trying to pretend they can dodge the cost and/or continue to mine fossil fuels, and in Australia this line has become especially well honed, especially in the Coalition.

The methodology has shifted over time, from outright denial that global warming is happening to: “We’re doing our bit” (Liberal Party) or “It’s too far off” and “Not our problem” (National Party).

Ex-leader of the Nationals, Michael McCormack, said in February: “I’m certainly not worried about what might happen in 30 years’ time.”

New leader Barnaby Joyce said: “We’ll all be dead by then”, or words to that effect, which is called “cut through”, so he got the job.

And the difficulty with committing to net-zero emissions by 2050, as the government will obviously have to do this year, is that it will be impossible to keep saying it will be cost-free.

Global warming is already costing plenty.

Research by Stanford University has found that since 2000, it has cost the United States and the European Union at least $4 trillion in lost output and tropical countries are 5 per cent poorer than they would have been without climate change impacts.

And, of course, Australia has seen plenty of extreme weather events in recent years, including the $100 billion bushfires in 2019-20.

The Coalition government’s song sheet for ministers is to no longer deny the science, but to say Australia will fix it with technology, not taxes.

The Minister for Energy and Emissions Reduction, Angus Taylor, told Sky News recently: “That’s how we’ll achieve this, not by raising the cost of energy, not by imposing taxes on Australians, not by telling them what kind of cars to drive, but by developing and deploying technologies that allow them to bring down their emissions.”

There are two things that will expose that fallacy: First, companies are voluntarily committing to net zero by 2050 and buying carbon credits and offsets to achieve it and therefore increasing their costs and prices, and second, the imposition of carbon border adjustments by countries that have put a price on carbon emissions to stop Australia being a freeloader.

Europe will soon introduce a carbon border adjustment mechanism (CBAM), as these taxes are called, and it will soon be global.

Meanwhile, the voluntary carbon offsets market is growing rapidly, based on demand from companies trying to do the right thing.

There are four global NGOs issuing carbon abatement certificates: The Verified Carbon Standard, or Verra, Climate Action Reserve, Gold Standard and the American Carbon Registry.

An outfit called Science Based Targets has signed up 1537 companies worldwide, including 32 in Australia, to limiting warming to 1.5 degrees.

Another group called Climate Action 100+ has 167 companies, including 14 in Australasia, with a variety of emissions targets.

Many local companies have committed to being “carbon neutral” on various time frames, either because shareholders and employees are demanding it, or they believe customers want it.

For example, Telstra has been carbon neutral for 12 months by buying two million tonnes of offsets – supporting carbon-reduction projects. To do it the company investigated 1000 projects and chose less than 50.

In October last year, Australian carbon trading firm CBL Markets launched the world’s first standardised carbon offset futures contract, called the GEO (global emissions offset).

The current spot price of GEOs is $US2.50 per tonne, up from US70c when it launched; trading is brisk.

And the Australian Clean Energy Regulator has called for tenders to run a local carbon credits exchange and has been flooded with bids, including from CBL Markets and the ASX.

Not that the official market in Australia is up to much.

On Tuesday this week, the regulator had issued a total of 95,354,615 Australian Carbon Credit Units (ACCUs), almost all of which have been bought by the federal government’s Emissions Reduction Fund, with taxpayers’ money.

What’s left – about 6 million units – can be traded on the exchange, but that represents less than 1 per cent of the emissions covered by the National Greenhouse and Energy Reporting scheme that was introduced in 2007.

The last auction of ACCUs in April resulted in an average price of $15.99, less than a fifth of the European price.

Why the difference?

Simply because Australia hasn’t committed to net-zero emissions by 2050 like everyone else, which means companies are not required to buy many ACCUs so there isn’t much demand for them.

Which brings us back to where this column began: Freeloading.

A minority of companies have made a net-zero emissions commitment of some sort and are buying offsets, which mean their costs rise and they become less competitive. Their competitors are freeloading.

Some companies are offering customers the option of paying more to offset their carbon footprint caused by buying that company’s product, and some people are actually paying it, even though most are freeloading instead.

The reason for a national target of net zero by 2050 – that is, making emissions reduction mandatory rather than “preferable” – is to spread the burden of reducing emissions and share the cost.

Eventually carbon border adjustments and a consensus among corporate stakeholders forcing companies to buy offsets will ensure that everyone pays in the end.

And maybe that’s the cunning political plan, to simply dodge the blame for the inevitable.

Alan Kohler writes twice a week for The New Daily. He is also editor in chief of Eureka Report and finance presenter on ABC news

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