Australia and climate change
Address by Paul O'Sullivan, Deputy Chief of Mission, Australian Embassy, Washington, to the Competitive Enterprise Institute's seminar on the theme "The costs of Kyoto: The Implications of Climate Change Policy," at the National Press Club, Washington, 15 July 1997.
Introduction
Ladies and gentlemen.
As many of you would already know, following the recent visit to Washington by the Australian Prime Minister John Howard, Australia is taking a forthright realistic stance in its approach to the current climate change negotiations. The reasons for this approach are as simple as they are compelling.
Australia like everybody else in the negotiations wants a good outcome for the global environment. But we are not prepared to accept an imposed result at any price. And nor should the U.S. or any other nation accept an outcome at any price. The only emission reduction target on the negotiating table, the one that is being pushed by the European Union, would impose a cost to Australia and others that would be disproportionate to any environmental benefit gained.
We do not see why an Australian, or American, should have to shoulder more of the economic burden for emission abatement than say a European. The economic cost to each should be the same. We believe that no-one country should take on a disproportionate share of the burden.
Prime Minister Howard has taken up Australia's argument with other world leaders including: German Chancellor Kohl, Japan's Prime Minister Hashimoto, UK Prime Minister Tony Blair and most recently President Clinton. Australia's message has been put clearly. We are committed to a successful outcome at Kyoto, one that is not only environmentally effective but which also safeguards all our economic futures and takes into account the national circumstances of all participants. We were therefore pleased that the recent Denver Summit and UN General Assembly special session did not result in some precipitate last minute deal on uniform targets.
It strikes us that the communique language of both those meetings signal that a long over-due sense of realism is beginning to creep into deliberations on climate change, and that the take-or-leave-it approach that the Europeans want to impose on the rest of us, irrespective of our individual national circumstances, is simply not going to wash with others, including the United States.
Having said that, and without going over too much of the same ground that Brian Fisher covered earlier on, I would like to spend the next few minutes developing some of these points. In particular, briefly describing our national circumstances and why these make us different; how this influences our negotiating position; why Australia argues for what we call differentiation and finally the benefits we think the US administration might be able to derive from the approach Australia is advocating, especially on the question of emissions trading, and getting developing countries on board.
Let me say though before going on that Australian business is strongly behind the Government on this issue. And the Government itself is unified in its approach with all those ministries with a direct interest in climate change pulling together in the national interest. This gives us a very strong sense of purpose and resolve in our approach to the climate change negotiations.
Why is Australia different?
So what explains the strength of our resolve and commitment? Australia's position stems from the fact that our national circumstances - our economic, social and environmental attributes - limit the extent to which our priorities, concerns and interests parallel those of other developed countries. Australia's physical characteristics, the fact that we have a land mass that is one-and-a-half times bigger than Europe but a vastly smaller population density, illustrate the stark differences between us and our OECD partners in western Europe. Australia has quite different sorts of environmental pressures; the speed with which our population is growing, relative to others, also differs; and we have abundant natural resources, including fossil fuel and minerals.
Not surprisingly because of an abundance of fossil fuel and mineral resources Australia is the world's largest coal exporter, the third largest aluminium exporter, and one of the largest (the fifth largest, in fact) energy exporters amongst OECD countries. Our exports are energy-intensive. In fact, our exports are, on average, twice as carbon-intensive as the goods we import.
Australia's trade outlook is also more and more defined by our growing economic ties with developing countries, particularly in the Asia-Pacific. Almost half (around 43%) of our trade is with non-OECD countries and over 60 percent of our exports go to Asia.
The picture that clearly emerges for Australia, and many other countries, is of an economy that is responding to, and benefiting from, the forces of globalisation by becoming increasingly specialised, particularly in energy intensive production. Such efficient specialisation should be encouraged.
I would argue, however, that if stringent emission controls are introduced in Kyoto then many of these industries will re-locate to non-OECD countries with no emission abatement commitments and less efficient, less environmentally sound technology.
Such a possibility is also very pertinent for the United States. Unlike the countries of western Europe which principally trade with each other , the economies of Australia and the U.S. have become increasingly interlinked with the dynamic economies of Asia and Latin America. The western hemisphere and the Asian Pacific rim now account for nearly 70 percent of U.S. exports. Latin America alone, if current trends continue, will exceed both Japan and western Europe combined as an export market for U.S. goods by the year 2010.
How does being different influence our negotiating position?
All this means that we simply cannot accept what the Europeans want - a uniform 15 percent reduction below 1990 greenhouse gas emission levels. To do so would be potentially very harmful for Australia's domestic economy and our international trade. The cumulative loss to the Australian economy by the year 2020 has been estimated at $150 billion, job losses would be in the tens of thousands. Looked at in another way, we would end-up losing more than we gained in the outcome from the hard-fought Uruguay round. Nearly eight years of trade negotiation would be wiped out in a single stroke.
The target set by the European union is unrealistic and unachievable, even for the EU. Just consider for a moment how many EU member countries are actually going to meet the ambitious commitments they made at the original earth summit in Rio five years ago. And remember we are talking about a reduction in emission levels to 1990 levels by the year 2000. Probably only two: the UK and Germany. But in both cases, this is 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 percent.
The original Rio commitments are not going to be met because they were never realistically based in the first place. Australia like a majority of developed countries cannot meet them. So the challenge for us, and other OECD countries, is to learn from our experience and come up with a credible plan of action to avert the global problem of climate change.
Differentiation
As I've said Australia cannot accept the flat-rate approach advocated by the EU. But like others, Australia wants to play its part. We do not want a free ride. As the Australian Prime Minister has made clear, we have argued for what we call differentiation because different countries are in different situations. The EU member countries - all fifteen of them - see the virtues of this kind of an arrangement 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 by countries capable of doing so are to be traded off against those making smaller reductions.
The EU also 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 is manifestly unfair to deny the remaining 8 Annex I countries, including Australia and the United States, access to differentiated targets. As Prime Minister Howard recently told his British counterpart, Tony Blair, all that Australia wants is to have the same capacity as individual members of the European Union to differentiate targets for greenhouse gas emissions.
The Europeans seem to recognise the merits of this approach for themselves but for nobody else. Yet the EU experience, the internal burden-sharing arrangements the Europeans have agreed to, suggests that differentiation is critical if a sustainable solution is to be achieved.
We believe that differentiation is the way to go. And we hope the us administration will come around and support this approach by the time we get to Kyoto. It is the fairest and most equitable means for countries to sign on and take domestic action to the extent they are able.
Developing countries
Of great importance, we see differentiation as an enticement for developing countries to eventually come on board. The rapid growth in developing country emissions means that without developing country participation, developed country efforts to address climate change will be overwhelmed.
Australia's efforts in the current negotiations have concentrated on working to ensure that the Kyoto outcome builds a solid foundation for future agreements. An agreement which not only protects our interests but can also accommodate all countries within the same framework. Differentiated targets would achieve this; uniform targets would not.
Differentiation provides the framework within which developing countries could make commitments but in a way which would ensure that they are equitably negotiated, taking full account of their national circumstances and stage of development. This approach is able, equitably and fairly, to account for the very wide divergences between developing countries: for example, between china and the republic of Korea.
Emissions trading
Before concluding, let me just mention where we stand on emissions trading especially in light of the U.S. view that to establish an appropriate regime it needs to be underpinned by reduction targets that are legally binding. Australia has adopted a cautious approach to this issue. We support the US concept in principle as we recognise that emissions trading can provide greater flexibility in reducing emissions.
However, we are keen to know the basis for the initial allocation of emission entitlements. Emissions trading could result in huge transfers of wealth. For example, uniform entitlements based on 1990 emission levels would result in the countries of eastern European being the chief beneficiaries. As this in effect would be rewarding them for their past inefficiency many developing countries would regard such an outcome as unfair, particularly as the wealth transfers are likely to dwarf aid flows.
Not only would countries need to resolve the issue of international allocation of emission entitlements, but individually, we may also need to address the domestic allocation of emission credits. This could involve questions such as - would it be necessary to allocate emission entitlements at the state, sectoral, industry or firm level? Obviously a central issue would be how to go about the task of establishing what criteria would form the basis of this allocation.
Such an allocation would have important implications for future economic activity within national and state boundaries. In Australia's case, a wide variation exists between our states in relation to their current and future levels of energy consumption and emissions growth. These issues will be critical for Australia in approaching the Kyoto outcome. We are urging other countries to examine these issues closely and to factor them into their approach to framing the Kyoto agreement.
Conclusion
We recognise that Australia's approach in these negotiations has been different from that of others. The realisation we came to early was that for meaningful reductions in global greenhouse gas emission growth to be achieved each country would have to take domestic action to the extent that they are able. And their individual national circumstances would have to be taken into account.
Australia is not looking for a free ride, rather we argue for equality of effort. No single country should take on a disproportionate share of the burden. The fairest and most equitable means to achieve this is through negotiated differentiation of country targets. It provides a framework under which all countries, including developing countries, can eventually take on commitments appropriate to their level of development and economic structure. Commitments that would lead to a containment of emissions growth while at the same time safeguarding all our economic futures.
That sums up what australia sees as being a successful Kyoto outcome. One that would 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 many decades. Let's take the time and trouble to get the approach right from the outset.