Climate Policy and Australia’s Resources Trade -  a new report

Report by Trading Nation

Australia has performed as well as, or better than, most developed nations in constraining emissions growth since 1990,and needs to ensure any future targets to do not undermine its resources trade, according a new report.

Internationally, Australia’s approach to climate policy in the lead-up to the Paris conference on climate change will need to be guided by three core considerations. First, Australia’s approach must be credible in the sense that its proposals must support an internationally co-ordinated approach to addressing rising emissions and the effects of climate change. Second, it must provide for a measured transition to a low-emissions global economy that minimises adverse social and economic effects. And third, it must prevent climate policy coming into conflict with trade policy, most importantly by ensuring that the gains which have been made in building a more open world economy are not undermined by green protectionism.

The report, by three former foreign affairs and trade officials, Nic Brown, Mike Adams and Ron Wickes, says there is now broad agreement that both developed and developing countries must make internationally-coordinated progress to address climate change. Although this understanding is still developing and lacks detail on the scope and mechanisms for greenhouse gas abatement, it is different from the position a few years ago when only developed economies were expected to meet binding targets.

A substantive outcome in Paris could profoundly affect the Australian resources sector. This in turn could have important implications for the Australian economy.

Australia’s dependence on resources at an early stage of processing, as well as its rapid population and per capita income growth, means that its economic structure and outlook are different from other developed economies. Among OECD economies, only Norway has greater dependence on exports of minerals and fuels. The minerals industry also faces intense competition from other suppliers, in a context where capital, skilled labour and technology are internationally mobile. Unlike many other OECD countries, Australia’s competitors are often emerging or developing economies. The number of emerging and developing economies supplying significant quantities of resources is increasing. From an Australian perspective, this underscores the need for key emerging economies to make contributions to any global solution on climate change.

Australia has performed better than most other developed economies in constraining emissions growth since 1990. Taking into account emissions embodied in trade casts a still more positive light on Australia’s emissions performance. If full account were to be made of the emissions embodied in trade by reporting consumption rather than production of emissions, the gap between Australia’s levels of reported emissions relative to the European Union, the United States and Japan would narrow markedly.

Australia will need to continue to press that its unique position among developed economies be recognised in any agreements or understandings which emerge from Paris. To maintain broad community support, Australia’s contribution should be no higher than the costs borne by other advanced countries and by Australia’s key trading partners. Modelling and other supporting analysis which takes into account the key drivers of emissions – including different economic structures, population growth and per capita income growth – would be useful in informing the Australian Government’s approach to negotiations.

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