Climate Change: The Task Ahead

Address by The Hon Tim Fischer MP, Deputy Prime Minister, Leader of the National Party, Minister for Trade, to the Countdown to Kyoto Conference, Canberra, 19 August 1997.

Ladies and gentlemen.

I would like to welcome you all here this evening, especially our foreign visitors, including from the United States - Senator Chuck Hagel and his wife Lilibet and US Congressman John Dingell.

Australia's approach to the climate change negotiations

Australia's approach to the climate change negotiations is premised on the need to achieve an outcome that can effectively address the problem of global warming, without unnecessarily damaging Australia's national interests or impeding regional economic integration. The challenge is to reconcile economic and political realities with the environmental reality of global warming.

Australia is committed to playing a constructive role in these negotiations. Reflecting the high stakes involved for Australia, the Government has taken a high international profile on the climate change issue. The Prime Minister has raised this issue with President Clinton, Prime Minister Hashimoto, Prime Minister Blair and Chancellor Kohl.

Other Government Ministers - including Alexander Downer, Robert Hill, Warwick Parer and I - have all actively pursued Australia's interests at international meetings and in our discussions with our overseas counterparts.

At home we have already taken concrete actions to reduce our greenhouse gas emissions.

My colleague, the Minister for the Environment, Senator Hill, later this week will outline to you our current initiatives and how we are working to strengthen our national greenhouse strategies. Let me emphasise, however, that Australia is serious about averting the risks associated with climate change and we are determined to pull our weight in reducing our own greenhouse gas emissions.

I am convinced that Australia's individually negotiated target approach to differentiation provides the best way of allowing very different economies to come on board and make their contribution to the global effort.

I was pleased to gain support for this position from the Republic of Korea, a fellow OECD member. Last week the Korean Minister for Trade, Industry and Energy, Mr Lim Chang-Yuel and I signed a joint communique calling for the Kyoto agreement to "result in differentiated targets for Annex I countries which address the full range of differences in national circumstances".

The insistence by some countries that the bar be set high will not result in an early solution to the problem of rising global greenhouse gas emissions. It will simply lock out the potential global contributions of many countries, especially developing countries.

These climate change negotiations require a balancing of a broad range of national interests.

We make no apology for pursuing our national interests because the Europeans, Americans, Japanese, indeed everybody involved in these negotiations, is doing exactly the same - looking for outcomes which are in their national interests.

Australia will continue to highlight the economic consequences that an unfair outcome at Kyoto would cause us, and the similar impact it would have on others.

We believe that no country should incur a disproportionate economic cost. What we are looking for is fairness and equity. As a highly efficient producer of energy and emission-intensive goods, Australia is particularly adamant about this. Simplistic solutions that pretend that economic costs don't matter - or which throw up new barriers to growth and trade - will not be in the interests of Australia, the region or the globe.

It is not as though reducing the scale or closing down Australian emissions-intensive industries will result in any overall benefit to the environment. After all the growing global economy still needs aluminium and iron and steel - and such industries will simply relocate, often to less efficient producers. As Australia is one of the most efficient producers of energy and emission-intensive goods, it is better that it be done in Australia than elsewhere, because that leads to the best global economic and environmental outcome.

An unfair outcome from Kyoto would put investment at risk.

For Australia to meet a target of stabilising our emissions at 1990 levels, major new investments which are energy or emission intensive could only proceed if emission savings are found elsewhere in the economy. If such savings could not be found, then investment projects would be displaced.

A sizeable proportion of new foreign investment in Australia is destined for our energy and emission-intensive sectors. This is because they are internationally competitive. A recent survey undertaken by the Department of Foreign Affairs and Trade estimates that over the next five years or so, around $68 billion worth of investment is destined for energy and energy-intensive projects.

These projects would create about 90 000 permanent full-time jobs. And over 80 per cent of the projects plan to export more than three-quarters of their production.

We do not want to see these projects jeopardised or new barriers to investment created. An unfair outcome would also have harsh economic consequences for regional Australia. The resulting regional dislocation in places like the Illawarra and Hunter in NSW, the Bowen Basin and Gladstone in Queensland, the Latrobe Valley in Victoria, the 'iron triangle' in South Australia, and the Kwinana and north west regions of Western Australia, would be significant.

An unfair outcome at Kyoto would put Australia's economic growth and future prosperity at risk.

And it needs to be recognised that our particular economic circumstances are not shared by larger more diversified economies like the US, EU or Japan. This makes the choices we would need to make, if faced with stringent uniform targets, very stark indeed.

Economic modelling has provided the Government with some guidance about the expected magnitude of the impacts that Australia might incur. For example, work undertaken by the Australian Bureau of Agricultural and Resource Economics shows that the cumulative loss to Australian income by 2020 could be more than $150 billion.

However, the Government's concern has not been informed by economic modelling alone. Much of this concern has come from our business people, our trade unions and the community at large.

In March this year the ACTU (representing 2 million members) and the American Federation of Labor-Congress of Industrial Organisations (representing 13 million members) called for a Kyoto outcome that delivers equitable burden sharing so as to not to destroy jobs, income and the livelihood of millions of people.

And we are certainly not alone in our concerns. Reflecting US industry concern about loss of competitiveness, the US Senate has unanimously passed a Sense of the Senate Resolution. This proposes that the United States not sign any Kyoto agreement if it would cause serious harm to the US economy, or if it does not include emission obligations for developing countries.

One of our visitors from the United States, who will be addressing you at this conference, Senator Chuck Hagel, was one of the key architects behind this resolution and I'm sure he will want to discuss it with you. Congressman John Dingell, who has played a very active role in the United States on climate change, will also speak to you at this conference.

Australia and the United States share the concern that action by developed countries alone will be ineffective. Even if OECD countries' greenhouse gas emissions fell to zero, global concentrations of greenhouse gas emissions will keep rising, due to increasing emissions in developing countries. By 2020 non-OECD countries are forecast to account for 70 per cent of global emissions.

Emissions Levels

Some commentators have suggested that those who have made a sizeable historical contribution to greenhouse gas concentration levels or those who are high per capita emitters should bear most of the cost and responsibility for reducing greenhouse gas emissions. While this might appeal to some at first glance and is convenient for others, it does not stand up to close examination.

Australia's relatively high level of per capita emissions reflects the structure of our economy and our role as an efficient exporter of energy-intensive products.

In 1990, 80 per cent of Australia's production of energy and emission-intensive goods - petroleum products, basic metals, minerals and resources, agriculture and food products, meat and milk products and chemicals - were exported.

Research undertaken by the Department of Foreign Affairs and Trade reveals that almost half the difference in per capita emission levels between Australia and Japan (a low per capita emitter) can be attributed to differences in trade patterns. A further quarter of the difference can be attributed to the share of nuclear power in Japan's energy mix. The reality is that Australians are not profligate in their consumption of energy and energy intensive goods.

Australia's manufacturing industry is not wasteful either. To the contrary, the energy efficiency levels of Australia's manufacturing industries are within 10 per cent of the OECD average.

Australia is not alone, nor is it going against the international tide, in needing to provide for an increase in emissions above 1990 levels. The approaches of countries like those of the EU, as well as Japan and the United States, all would have the Kyoto deal allow for emission increases for some countries. For example:

. the EU's internal arrangement allows significant emission increases for five of its member countries - Sweden, Ireland, Spain, Greece and Portugal - of up to plus 40 per cent above 1990 levels; and

. the Japanese per capita approach would allow emission increases from low per capita countries, such as Japan.

Emissions trading and crediting would also allow individual developed countries to increase their domestic emissions.

Australia is attracting more criticism on this score simply because we have been more open than some others in saying that we are going to need some growth in our emissions above 1990 levels.

Given the structure of our economy and trade profile, it is wrong to suggest that we are being irresponsible in seeking an outcome that would allow our emissions to grow, albeit at a slower pace. We advocate emission targets that take into account individual economic structures. Targets that are realistic and achievable, but nonetheless demanding.

Competitiveness concerns demand this. OECD analysis confirms that the trade exposure to developing countries of Australia and other OECD-Pacific countries is at least three times greater than it is for OECD-European countries.

Efficient Specialisation

Australia has encouraged efficient specialisation in our economy. As a result we are now one of the world's most efficient producers of energy and emission-intensive goods, such as aluminium and aluminium ores and concentrates, of which Australia is the world's fourth largest exporter. Emission intensive industries have located in Australia due to the availability of our abundant resources and efficient technology.

This specialisation has increased as a result of multilateral trade liberalisation - such as the GATT Uruguay Round and APEC processes - and is in line with our natural comparative advantage.

As the current negotiations do not require developing countries to accept obligations to limit their emission growth, the potential is there for emission-intensive industries to simply relocate to countries without emission constraints.

Changing the sources of supply will only change the global distribution of emissions not the global total. It will also redistribute output and employment away from those with emission growth obligations to those without such obligations. In all likelihood this will fail to do anything to assist global emission reduction.

Further, uniform emission targets threaten to deny the global economy the benefits of specialisation. Yet in recent decades, specialisation has underpinned much of the rapid growth witnessed in global and regional trade and investment. This growth has benefited all our economies, enterprises and communities.

Australia and the Asia-Pacific

We are especially concerned to ensure that Kyoto does not produce an outcome that would cut across efforts by Australia, and our regional trading partners in the Asia-Pacific, to integrate our economies and develop a regional chain of production.

In the Asia-Pacific region, APEC is acting as a catalyst for integrating a range of economies - highly industrialised, developing, resource-based and newly industrialising economies.

Regional trade liberalisation efforts have all had the objective of promoting economic development based on the freer movement of goods, services and capital. We can't afford an outcome from Kyoto that cuts across or undoes the benefits from these hard won efforts.

Rapid growth in the region has been accompanied by a sharp increase in energy consumption and demand. East Asia's demand for energy is doubling every 12 years, compared to a global average of 28 years. Australia's energy exports to East Asia have responded: for example, our energy exports to China have grown at a trend growth rate of just over 30 per cent per year over the past 5 years.

The energy mix in the Asia Pacific is changing with greater use of liquefied natural gas. This diversification will contribute to a better global greenhouse outcome. Australia's LNG exports have played their part; doubling in the past five years, and are forecast to quadruple by 2010.

Rapidly rising regional incomes and consumer demand in the Asia-Pacific has also translated into strong regional demand for aluminium. Australia's aluminium exports have grown at the rate of 6.5 per cent per year over the past 5 years. Demand for processed and unprocessed food is also rising rapidly. Australia's processed food exports to China have grown at a trend rate of just over 50 per cent over the past five years, while at the same time our total food exports to ASEAN have grown at a trend rate of 14 per cent.

The dynamic Asia-Pacific region is forecast to out-perform world growth for the foreseeable future. Meeting the forecast sustained rapid growth in demand - especially from South East Asia and China - over the next couple of decades will be essential to guaranteeing the region's prosperity.

However, the Asia-Pacific region will need to deal with a number of environmental challenges stemming from its phenomenal economic growth. The region encompasses a large number of countries that are especially vulnerable to environmental pressures, including climate change impacts. Rising sea levels and increased storm frequency could have a devastating impact on many island communities in the region, especially in the South Pacific, Indonesia and the Philippines.

Australia is playing an active role bilaterally in our region to reduce greenhouse gas emissions, notably by giving increasing priority through its aid program to development projects that contribute positively to greenhouse gas abatement. We are currently supporting bilateral and regional projects worth $120 million, with projects in the South Pacific accounting for just over half.

One of the ways that regional environmental concerns are being addressed is through APEC. At Osaka in 1995, APEC leaders agreed to put the impact of the region's fast expanding population and rapid economic growth on food, energy and the environment (the FEEEP initiative) on APEC's long term agenda. Australia is an active participant in this program.

The task ahead

The international community has 103 days left till Kyoto to grapple with critically important issues.

Australia's efforts in the climate change negotiations are therefore focused on constructively finding the best way forward. A way that blends economic, political and environmental realities. We want to find a global solution to climate change that can deal with the dynamic of highly specialised economies, such as Australia's, which is locked into the vigorous growth of the Asia Pacific region.

As the Prime Minister, John Howard, has made clear, Australia is determined to pull its weight in reducing global greenhouse gas emissions. But we seek a Kyoto outcome which acknowledges legitimate differences in economic structures and trade profiles, and provides a basis for developing countries, especially large emitters, to agree to take on commitments in keeping with their economic circumstances.

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Local Date: Tuesday, 07-Jan-2014 10:10:20 EST