Department of Foreign Affairs and Trade, Australia

 

AUSTRALIA AND CLIMATE CHANGE


Address by The Hon Alexander Downer, MP, Minister for Foreign Affairs, to the "Global Emissions Agreements and Australian Business" Seminar, Melbourne, 7 July 1997.

Introduction

Ladies and gentlemen.

I am sure that all of you here this evening are aware of the extensive publicity that Australia's approach to the climate change negotiations has been getting. It is a very high profile global and environmental issue for this Government; a challenge for Australian diplomacy as we approach the Kyoto meeting in Japan this December; and a matter of paramount economic concern to us all.

The Prime Minister, Tim Fischer, Robert Hill, Warwick Parer and I have taken every opportunity so far both at home and abroad to promote greater understanding and acceptance of Australia's position in the climate change negotiations. To put it quite bluntly, the prospect facing Australia if the Kyoto negotiations go against us is potentially very harmful for our domestic economy and our international trade.

The challenge therefore is twofold: to contribute constructively to an outcome that deals with the problem of global warming and simultaneously to protect Australia's national interests.

The Government has left no-one in any doubt where Australia stands on either front. We have pursued the issue vigorously and relentlessly in our contacts with world leaders and other decision-makers, sometimes against quite openly hostile opposition. But the stakes for Australia are far too high for any of us to worry about the personal or political discomfort that we might occasionally encounter in our defence of Australia's position. In any case, we know our position is right.

We are encouraged by signs that our efforts might well be paying off. I don't want to exaggerate the impact of our intensive, and high-level lobbying efforts. But it is fair to say that we are making some progress. We are seeing signs that Australia's voice in the climate change debate is being heard; that our case does have strength; that we have put forward credible alternatives to the hitherto take-it-or-leave-it approach the Europeans want to impose on the rest of us, irrespective of our individual national circumstances.

At the recent Denver Summit and UNGASS meeting we saw outcomes that were not only encouraging from the viewpoint of Australia's interests but have also strengthened our own resolve.

We were heartened by the language of the UNGASS Declaration calling for "realistic and equitable" greenhouse gas emission targets. This is precisely the outcome that Australia is calling for, and working towards, at Kyoto. Clearly then we have some support and understanding for our concerns and position. Several influential American legislators are also on side as we saw during the Prime Minister's recent visit. But we still have a long way to go. The negotiating path that lies ahead of us is going to be a difficult one.

Another thing we are seeing coming through in meetings like the Denver Summit and UNGASS is the broad range of interests that are at stake in the climate change negotiations. Certainly our own focus is on Australia's interests. I make no apology for that. Because the Europeans, the Americans, indeed everybody involved in these negotiations are doing exactly the same. All of us want the same thing: a good outcome for the global environment. But it will only be a good outcome if it serves everybody's interests. I'll come back to this equity theme a bit later in my speech. But firstly let me explain Australia's case to you: our economic arguments; the reason we cannot accept flat-rate targets; our insistence on differentiation; and finally what we are doing about global warming.

Economic costs

We, the Government, are going to continue striving for an outcome that does not harm Australia's economic interests. To approach the negotiations any differently would simply invite trouble. It would impose on Australia a degree of economic sacrifice that is out of all proportion to Australia's share of global emissions.

Therefore, we will go on highlighting the economic consequences that an unfair outcome at Kyoto would cause Australia. It would put investment at risk; it would put Australian jobs at risk particularly in regional Australia; and it would put Australia's economic growth and future prosperity at risk.

The outlook were we to go along with the kind of approach that the European Union wants, but we oppose, is really quite worrying. Let me give you an idea of the magnitude of the costs that we will have to bear. ABARE, for example, estimates the cumulative loss to the Australian economy by the year 2020 would be $150 billion. Resultant job losses would run into the tens of thousands.

While some may argue about the seriousness of this we believe it is significant and disproportionate relative to others. Looked at another way, we would end up losing more than we gained in the hard-fought Uruguay Round outcome. That is a price in lost income and lost jobs that Australia simply cannot afford to pay, nor should we have to.

It should be said that if others accepted the EU approach but Australia did not then it would still have a negative impact on our economy. The resulting regional dislocation in places like the Illawarra and Hunter in NSW, the Bowen Basin and Gladstone in Queensland, Geelong and Latrobe Valley in Victoria, Port Pirie in South Australia, and the Kwinana region of Western Australia would be significant.

Ours is an especially energy-intensive economy. We have a relatively rapid rate of population growth. Our trade linkages with developing economies particularly in East Asia are strong. Therefore, the only target that Australia could agree to at Kyoto would be one that allowed reasonable growth in our greenhouse emissions.

The reality is that because we are a relatively small and highly specialised economy we cannot afford the cost involved in taking on a disproportionately high share of the global greenhouse abatement effort. It would have a negative impact on every sector of the Australian economy. This includes energy, transport, agriculture and the residential sector.

The competitiveness of Australia's energy-intensive non-ferrous metals and steel industries would decline as a result of higher power costs. Moreover, given our reliance on fossil fuels and fossil fuel intensive exports Australia's export revenues, and hence national income, would significantly decline.

Such a cost to Australia would be disproportionate to any environmental benefit gained. At best, the flat rate outcome favoured not only by the EU but the U.S. as well would only have a marginal impact on the growth of global emissions. For all these reasons, we strongly advocate differentiation, not just for ourselves but for everybody.

Flat rate targets

At this stage, the U.S. has not come up with a specific target. The Europeans have. They are proposing in these negotiations a 15% reduction on 1990 emission levels by 2010 for the EU collectively and other OECD countries. Such an ambitious target is unrealistic and unachievable, even for the EU. It is hard to believe that the EU's proposal is really anything more than a negotiating tactic to make them look 'green'. It has little to do with what the EU thinks it can achieve. Nor does it in any way reflect upon any EU's performance in delivering on the commitments it made at the original Earth Summit in Rio five years ago.

Only two EU countries are expected to meet the implied Rio commitment of reducing their emissions to 1990 levels by 2000. In both cases these are due to national circumstances unrelated to greenhouse. The UK because of its switch to natural gas following the closure of inefficient coal mines. And Germany because of the collapse of East German industry. Following reunification East German emissions fell by almost 50%.

According to the European Commission, had it not been for this East German factor the EU's total carbon dioxide emissions would actually have risen 9% above 1990 levels by the year 2000. As it is the increase will be between 3% and 5.4%.

The EU knows full well that a 15% reduction by 2010 is simply not a realistic target. Nor was it ever meant to be. It is a negotiating figure that the Europeans will not have to meet given that the Americans would not agree to a global, flat-rate target of that magnitude.

Our sense is that there is growing pressure on the US Administration to carefully examine the costs that greenhouse gas abatement would impose on the American economy. The fact that they have not yet put forward a specific target tends to bear this out. Moreover, there was a "Sense of the Senate" resolution brought forward a couple of weeks ago that called for a full analysis of any protocol aimed at reducing greenhouse gas emissions.

Australia cannot accept a flat-rate target approach. Mr Howard made this very clear in his most recent meetings with President Clinton and Prime Minister Blair. Not only does it have the potential to do us harm economically, but it could also unnecessarily damage the global economy as a whole. The costs both nationally and globally would be higher because a flat-rate target does not take into account differing national economic circumstances. It also ignores economic interdependence.

Australia's case helps to illustrate this point. We have strived to promote a level playing field in the global economy. We firmly believe that the global economy will function most efficiently, and to everybody's benefit, if we all make the most of our respective comparative advantages. We should also be complementing each other's comparative advantages, as Australia is doing. The result in our case is that the Australian economy has become a highly specialised resource processor, part of a regional production chain, linked to Asia-Pacific growth.

The benefits of such specialisation are threatened by flat-rate targets of the kind the EU, and U.S., would like to see. This specialisation has underpinned much of the rapid growth in global and regional trade and investment witnessed in recent decades. This growth has benefited all our economies, businesses and communities.

Efficient specialisation should be encouraged. Energy intensive industries have located in Australia due to the availability of our abundant fossil fuel resources and efficient technology. If stringent emission controls are introduced in Kyoto these industries will relocate to non-OECD or developing countries with no emission abatement commitments and less efficient, less environmentally acceptable technology.

This phenomenon, known as 'carbon leakage', would undermine the very objective of setting targets for one group of countries. It would be achieved at great cost to Australia but would represent little gain for the global environment.

In our view, much of this damage can be avoided.

Differentiation

This is an appropriate point to expand the equity theme that I briefly introduced earlier. Our position, and the case we are arguing in the climate change negotiations, is based on a concept that we as Australians can readily identify with, and accept. And that is the idea that while we should all be pulling our weight in tackling global warming, nobody should be worse off for doing so. In other words, an Australian should not have to shoulder more of the economic burden for greenhouse gas abatement than say a European, American or Japanese. We are talking about an 'equality of effort.'

The best means for doing this is through differentiation. It is by far the fairest approach we can take to address a global problem: not just our problem but everybody's problem. Therefore if everybody does their fair share based on an equitable arrangement like the one the Europeans have come up with for themselves we can achieve a meaningful environmental outcome at Kyoto.

That is why Australia is arguing for differentiated targets that take into account each country's particular circumstances, economic costs and available opportunities to limit emissions as long as no-body is relatively worse off as a result. We are not looking for a special deal just because we want to negotiate our own target. We are not seeking anything new.

In effect, Australia wants nothing more than the arrangement the 15 European Union countries propose for themselves. They have accepted differentiation internally within the EU. They recognise that not all EU countries have the same capacity to reduce their emissions. Larger cuts made by countries capable of doing so are to be traded off against those making smaller reductions.

The EU accepts that the Economies in Transition (Eastern Europe and Russia) should have differentiated targets. 27 out of the 35 Annex I countries are therefore to be allowed access to differentiated targets.

It appears manifestly unfair to deny the remaining 8 Annex I countries, including Australia, access to differentiated targets. As the Prime Minister commented during his recent UK visit, Australia wants to have the same capacity as individual members of the European Union to differentiate targets for greenhouse gas emissions.

Let me stress again that if we are to maximise our efforts in tackling global warming then differentiation is the best and fairest means. Australia recognises this. We have submitted detailed proposals on negotiating such an outcome before Kyoto. The Europeans seem to recognise the merits of this approach for themselves but for nobody else. Yet the EU experience, the internal burden-sharing arrangement the Europeans have agreed to, suggests that differentiation is critical if collective emission reductions are to be maximised.

Australia wants a solution that deals with the dynamics of a global economic problem. Climate change is a global problem requiring a global solution. It is in our national interest to find a solution that is effective and deals fairly with everybody. Differentiation achieves this. It is the key to making the Kyoto agreement effective over the long term, by getting countries progressively on board in making commitments that are commensurate with their national circumstances.

A successful Kyoto outcome will be one that will allow all countries to sign on and take domestic action to the extent that they are able.

Only an outcome based on cooperation not coercion can deliver a sustainable strategy. Dealing with this problem will take decades. Let's take the time and trouble to get the approach right from the outset.

Australia's commitment

The current climate change negotiations are about finding a way in the next century to limit global growth in greenhouse gas emissions. Australia is serious about playing its part to meet this global challenge. As the Prime Minister said in his London speech last month, Australia does not want a free ride - we are prepared to pull our weight to meet this global challenge.

The Rio Earth Summit approached the issue of climate change in terms of reducing global emissions growth to the year 2000. This objective has not been met because the commitments made then were never credible. Australia, like the majority of developed countries, cannot meet Rio's implied non-binding objective for the so-called Annex I countries of returning their greenhouse gas emissions back to 1990 levels by 2000. The challenge for this Government, and other OECD governments, is to learn from our experience since Rio and come up with a credible plan of action to avert the global problem of climate change in the next century.

The Government accepts the precautionary principle contained in the Framework Convention on Climate Change that the lack of full scientific certainty should not be used as a reason for postponing action. Unless credible evidence appears to the contrary, it would be remiss of my Government, or any other government, to ignore the risks associated with global climate change.

Moreover, as part of our obligations under the Convention, which Australia ratified in 1992, a number of reforms and measures to reduce the growth in our emissions have been taken.

One of the Government's current major initiatives, known as the Greenhouse Challenge, involves more than thirty of our largest enterprises covering mining, manufacturing and services. Together they account for more than 45% of Australia's industrial greenhouse gas emissions for their sectors. By the year 2000 they aim to reduce their projected aggregated emissions by 14% below the level they would otherwise have been.

The initiative has now been extended to include small and medium sized enterprises. Twelve trade associations have now signed onto the Greenhouse Challenge and a further 84 enterprises have notified the Government that they intend to sign agreements, making more than 126 committed participants in all.

Other initiatives in support of our Climate Change Convention commitments include encouraging reform of our electricity and gas markets, resulting in increased efficiency of energy use. Overall, our performance compares favourably with most developed countries. In recognition of the need to continue these efforts, we are currently working on a number of fronts to strengthen our national strategies.

Next Steps

Looking ahead, we need to go to Kyoto knowing that our fellow Australians are fully aware of all the issues, and the implications were we to sign the agreement or not. Therefore I am announcing tonight an initiative aimed at carrying the community along with us in the process.

We are undertaking an analysis of the range of implications of possible Kyoto outcomes and the impact these would have on the Australian economy. The results are to be compiled in an issues paper that will be the basis for further community consultations.

Ordinarily, we would have undertaken this kind of an exercise only after the conclusion of the negotiating process. But the decisions that confront us are enormous. So too are the economic consequences. It is vital therefore that this process takes place before Kyoto, rather than afterwards.

We will be informing State and Territory Governments, industry representatives, non-government organisations and community groups of our negotiating position compared to others who will be at Kyoto. It will also provide us with additional input that we will be taking into account in further developing the Government's approach and position in the intensive negotiations in the run-up to Kyoto. I urge you therefore to make the most of the process.

Conclusion

In conclusion, let me say that this Government is genuine in its commitment to achieving an international agreement that deals with global warming whilst simultaneously ensuring that Australia's future prosperity is not put at risk. This is wholly consistent with the approach that others are taking, and there is nothing contradictory in our position. After all it strikes the right balance between our national interests and international responsibilities. I can assure you that we are committed to seeing these negotiations through to the end, and to an outcome that is good for Australia and future generations of Australians as well as the global environment.


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