Australia must shift from climate laggard to leader

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It breaks my heart to read about the devastating bushfires in Australia. Each day, new horrifying accounts emerge, seemingly with no end in sight. Thankfully there are some heart-warming stories too, stories of the courage of firefighters — affectionately known as firies — and the generosity of strangers.

While I’m a world away in London now, I grew up in a small town called Cockatoo in Victoria, Australia. Our home was a tree-changer’s delight — a big isolated plot surrounded by eucalyptus trees, with a forest just across the road. But in summer, it was a fire trap — the threat hung over our heads.

Before I was born, my parents almost lost their home in the Ash Wednesday bushfires. Dad told us fragments of stories and several clues were dotted around the property — blackened tree trunks here, a cracked window left unfixed there. My parents were amongst the lucky ones though. In that tiny town, 6 people lost their lives and 307 buildings were destroyed. In total, 75 people lost their lives across Victoria and South Australia.

The fires burnt an enduring fear into my mind; a fear shared by all in our community, but rarely discussed. I shuddered whenever I heard the alarm of the local fire-station, it sounded just an air raid siren from the war films.

While children in most countries are taught a little about fire — stop, drop and roll — my sister and I were taught detailed fire survival strategies: to fill the bathtubs; to have thick woollen blankets to hand; how to find and use firehoses; how to fight ember attacks; how to locate a fire bunker; and to have your life packed into a box, ready to flee if the time comes.

Sadly, a lot of kids living in the Australian bush are taught similar things. Only now, it must be so much harder for them, as they know that the fires are likely to become more ferocious and frequent over time.

Yes, Australians are used to fire. It is no surprise that they are amongst the best in the world at preparing for and responding to bushfires. Yet no amount of skill, training and resolve could have prepared Aussies for the megafires of 2019/20. Even though I grew up in a fire zone, I can’t even begin to imagine what the affected communities have been through.

At the time of writing, the fires have burnt through more than 10 million hectares, an area larger than Portugal. To put that in context, the 2019 Amazon fires, the 2018 California fires and the aforementioned Ash Wednesday bushfires all burnt less than 1 million hectares each. At least 27 people have died and more than 2,000 homes have been destroyed.

News headlines read like dystopian fiction: an estimated 1 billion animals have died; smoke has blanketed Sydney, Melbourne, Canberra and has even discoloured New Zealand’s glaciers; some fires are creating their own weather systems, called pyrocumulonimbus clouds, which can create dry lightning that ignites further fires; the navy was called in to evacuate stranded residents and tourists; and the army reserves were called up to fight the fires.

Leaders throughout history have stepped up at such trying times, not Australian Prime Minister (PM) Scott Morrison — he has proven himself feckless and heartless. To cite some examples: he has regularly tried to blame others, particularly the states; he drew the ire of citizens by taking a holiday in Hawaii during the height of the crisis; and when he returned and toured the affected communities, he forced a pregnant lady to shake his hand and then turned his back when she asked for help. Just when it seemed the PM couldn’t be more tone-deaf, he ran self-promoting advertisements online, which took people to a page where they could donate — not to affected communities, but to his political party.

The reaction of one weary firefighter summarised the nation’s sentiment perfectly. After spotting a film crew, he slowed his fire truck to deliver a message “Tell the prime minister to go and get f**ked from Nelligen” before driving off. He later collapsed through exhaustion.

Scott Morrison is in a bind, not that I or anyone else cares. He was installed as PM after hardliners in his conservative party ousted Malcolm Turnbull after attempting to introduce emissions reduction targets (I’ve previously written on Australia’s struggle to introduce a carbon price). Scott Morrison then won an election in 2019, gaining seats in coal-rich areas of Queensland thanks to his support for mining.

The last thing Scott Morrison wanted to do is to make the link between the fires and climate change. Doing so would draw attention to his utter lack of both mitigation and adaptation policies. So, he tried to downplay the extent of the fires — Australia has always had fires after all. Only, that approach made him look (or revealed him to be) callous, dishonest and evasive.

Of course the fires are unprecedented, Australians are in shock and can hardly think or talk of anything else right now. The fires have been burning since September and at times have flared up with alarming intensity.

And of course climate change has played a part. The 2008 Garnaut Climate Review commissioned by the government (albeit by a different party) found that “fire seasons will start earlier, end slightly later, and generally be more intense. This effect increases over time, but should be directly observable by 2020.”

One of the underlying studies cited by the review, predicted a 15 to 65% increase in extreme fire days by 2020 under 1°C of warming (which is where we are now) and a 100% to 300% increase by 2050 at 2.9°C warming (which is where we seem to be heading). The report defines an extreme fire day as “Fire suppression virtually impossible on any part of the fire line due to the potential for extreme and sudden changes in fire behaviour.”

The report also warns that “Early season starts suggest a smaller window for pre-season fuel-reduction burns,” blunting one of the key tools that firefighters have to reduce risk.

The current Australian government has effectively ignored these warnings by not pulling its weight on climate change action, nor investing sufficiently in adaptation measures. Its do-nothing strategy is exposing firies to increasingly unrealistic demands and inflicting misery on countless communities.

Australia must urgently create effective policies to lead on climate change action. It must also make tough decisions on how to cope with the projected increased frequency and severity of fires and other natural disasters.

Climate change must be treated as a non-partisan issue, as it once was and as it currently is in the UK and many other parts of the world. After all, the effects of climate change do not respect party lines.

Unfortunately, despite the warnings and the traumatic bushfires, we’re unlikely to see Scott Morrison or his party change their stance any time soon. Expect the same three arguments against climate change mitigation to be dusted off and wheeled out again. As the planet cannot afford further delay, let’s debunk all three now.

Myth 1: Australia is too small to make a difference

Opponents of meaningful climate action argue that Australia can’t make a difference, because it only emits 1.3% of global greenhouse gas emissions.

There are many issues with this argument:

a) Climate change action requires a joint global effort, with everyone pulling their weight. Australia is not currently doing that. It has the single highest per capita emissions of all OECD countries and has higher total annual emissions than the UK despite having a third of the population. It was recently ranked dead last out of an assessment of the climate policies of 57 countries.

b) It is impossible to encourage others to make deeper emission cuts from position of weakness. Australia has lost all credibility at climate conferences. However, if it set its own ambitious target, it could shame other countries into stronger action.

c) Australia has been accused of actively obstructing global and regional climate agreements, including the COP25 and the 2019 Pacific Islands Forum. That is, it is using its purportedly limited influence to push in the opposite direction.

d) Australia is the largest exporter of coal and the third largest exporter of total fossil fuels by CO2 potential, trailing only Russia and Saudi Arabia.

e) Australia is ramping up its coal and LNG exports. If government and industry projections are realised, Australia could be responsible for 13% of global emissions by 2030 (assuming a Paris Agreement pathway).

f) Other countries who emit less GHGs than Australia have led by example, raising the standard for everyone else. Finland has pledged to become carbon neutral by 2035, the UK has legislated net-zero emissions by 2050, even Australia’s friendly rival New Zealand has legislated net-zero emissions by 2050.

Myth 2: Australia is on track to meet its Paris Agreement targets

Scott Morrison often states that Australia will meet its Paris Agreement targets “in a canter”. The only problem is, it isn’t true — Australia’s emissions continue to rise. The 2019 UN Emissions Gap report mentions that it will be “challenging” for Australia to meet its reduction target, particularly as it has “no major policy tool to encourage emission reductions”.

The reason for Scott Morrison’s confidence is that he is planning to use an accounting trick to help Australia meet its commitments on paper. The UN states that “it appears that the Australian Government intends to use carry-over permits from the Kyoto Protocol to do so”.

To put it simply, the Australian government isn’t planning to reduce emissions in real terms at all: “The latest projection published by the Government shows that emissions would remain largely unchanged up to 2030”.

Climate change doesn’t recognise questionable accounting techniques, however, so Australia is effectively exacerbating the issue, while other — and in most cases poorer — countries bear the burden of reducing global emissions. It is difficult to see how this meets Scott Morrison’s much repeated mantra of a ‘fair go’.

Myth 3: Strong climate action will ruin the economy

The Garnaut Review — like the UK’s Stern Review before it — found that the benefits of mitigating climate change greatly outweigh the cost, “Australia’s interest lies in the world adopting a strong and effective position on climate change mitigation”.

Australia’s economy will suffer from the effects of climate change more than most. In particular, climate change will have adverse impacts on tourism (the Great Barrier Reef is expected to perish at 2 degrees warming), agriculture and will cause increasing physical damage to infrastructure and properties.

A report by the Australia Institute found that Australia’s economy is more diversified than other fossil fuel exporters and is relatively better placed to cope with a transition out of this sector.

By ramping up coal and fossil fuel exports, Australia is exposing itself to increased transition risk — the risk that the world’s response to climate change will strand assets and affect valuations of carbon intensive companies.

Outgoing Bank of England governor Mark Carney has warned that companies that ignore climate risks will go bankrupt and that a large proportion of fossil fuel investments may become worthless. The tide already seems to be shifting, with asset managers and insurers increasingly divesting from coal and refusing to provide insurance cover to new projects.

Australia could make its economy more resilient to transition risk by committing to a plan to transition out of coal, as Germany and others have done. It should divert resources to technologies that will prosper in the new carbon economy, like funding research and supporting new Australian technologies to become commercially viable. For example, CSIRO has developed technology to efficiently transport hydrogen to the world — Australia could become a leader in clean fuel exports if only it backs technological breakthroughs like this instead of doubling down on coal.

Phasing out fossil fuel subsidies and reintroducing carbon pricing would further equip Australia’s economy to thrive in a low carbon world.

Bushfire relief

If you too have been touched by the fires, you can help by supporting relief charities. I have listed some examples below.

Relief and recovery efforts:

· Red Cross

· Salvation Army disaster appeal

Local fire services:

· New South Wales Rural Fire Service

· Victoria’s Country Fire Authority

· South Australia’s Country Fire Service

Help for wildlife:

· WIRES Wildlife Information Rescue and Education Service Emergency Fund

· WWF bushfire emergency

The ABC appeals website includes further information on how you can help.

5 ways you can fight climate change in 2020

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It really shouldn’t have come to this. As we embrace this new decade, we are faced with the daunting task of needing to halve global CO2 emissions to limit the increase in global average temperatures to the ‘safe’ level of 1.5°C above pre-industrial times. This is despite not yet managing to find a way to arrest the relentless rise in emissions — global emissions have increased by 4% since the Paris Agreement was struck in 2015.

It is tempting to point the finger at others for getting us into this mess — oil companies, governments, lobby groups, capitalism. However, this would be tantamount to admitting defeat and besides, it would do little to solve the problem. We simply do not have enough time to play the blame game. Everyone urgently needs to urgently pitch in if we’re to stop runaway climate change — it will be the fight of our lives. We may not be able to control the situation, but we can certainly change how we respond to it.

A successful — yet morally questionable — artist once sang ‘if you want to make the world a better place, take a look at yourself then make a change’. And that’s the perfect mantra for tackling climate change.

What better time to start than today? There’s no need to take things to extremes, just do what you feel you’re able to. A large number of people making smaller changes can have a greater impact than a small number of people making drastic changes.

Here are 5 ways you can make a big impact in the fight against climate change. You might even save yourself money and improve your health in the process.

1. Consider switching your retirement savings to an ESG fund

Although you probably rarely think about it, your largest single investment other than your home, is likely to be your retirement savings fund (e.g. pension, superannuation or 401(k)). If you are invested in the default option, chances are you are inadvertently funding projects that are inconsistent with limiting climate change, such as new coal mines or coal-fired power plants.

Money talks. Widespread divestment from unsustainable companies will adversely affect their valuations and increase their cost of financing, rendering new projects unviable.

Funds that consider environmental, social and governance (ESG) factors have experienced rapid growth in recent years as awareness of and demand for sustainable investments has increased. For most pension plans, you will have the option to switch your balance to ESG themed investment options. If you don’t, ask your employer why not.

Investing in ESG does not necessarily mean sacrificing investment returns, in fact, the opposite may be true over the long term. ESG data is patchy and historical periods are relatively short, so it is difficult to draw firm conclusions on relative performance at this stage. However, early studies have found that companies that adopt sustainable approaches are more likely to outperform over long-term investment horizons.

ESG conscious investors have had significant wins by influencing heavy polluters to adapt their corporate strategies. For example, asset managers under the Climate Action 100+ coalition co-filed a shareholder resolution, which forced BP to adopt a business strategy that is consistent with the goals of the Paris Agreement.

Note: Choosing your investments is an important financial decision and you should consider all of the factors relevant to your situation, such as your risk appetite and investment horizon. This article is not financial advice. Please speak to a financial advisor if you are unsure.

2. Eat less meat

The simple act of putting food on our plates is a major source of greenhouse gas (GHG) emissions. The IPCC’s fifth assessment report found that GHG emissions from agriculture, forestry and changes in land use represent 25% of total emissions. Almost half of these emissions are driven by livestock (both direct emissions and land use), despite meat and dairy providing less than 20% of the global calorie intake.

Livestock also uses almost 80% of the world’s total agricultural land and is a major source of deforestation and biodiversity loss. Reducing your meat intake is one of most significant steps that you can take to reduce your environmental footprint.

In 2019, the IPCC released a special report, which estimated the potential annual GHG emission savings by 2050 if the world adopted different diets. A vegan diet would reduce emissions by 8 GtCO2-e per annum. To put that in context, the annual emissions of the USA — the second largest emitter — were just over 6 GtCO2-e in 2018. The global Veganuary campaign is a good opportunity to try a vegan diet for a month.

In practice, a vegan diet is likely to be a step too far for most people. If that sounds like you, then other dietary options can still have a significant environmental benefit (see chart below).

Source: Analysis based on IPCC Special Report on Climate Change and Land, Chapter 5

A ‘flexitarian’ diet — where three quarters of meat and dairy consumption is replaced with plant-based alternatives — provides most of the environmental benefits of a vegan diet, but allows occasional indulgence in meat in dairy.

Easier still, simply switching from beef and lamb to less intensive meats like chicken, would achieve almost half of the GHG emissions benefits as a full vegetarian diet. The chart below shows the GHG emissions per gram of protein.

Source: Our World in Data, based on data from Clark & Tilman (2017). Comparative analysis of environmental impacts of agricultural production systems, agricultural input efficiency, and food choice. Environmental Research Letters, Volume 12, Number 6.

3. Lobby and protest

The year 2020 is a critical one for climate action. The five-year ‘ratchet mechanism’ for Nationally Determined Contributions (NDCs) under the Paris Agreement will kick in, requiring countries to either update or communicate a new NDC. Under the agreement, the NDCs should be “ambitious” and represent a “progression over time”. In theory then, we should see a round of stronger commitments announced at COP26 in Glasgow at the end of the year. However, it would be healthy to be sceptical that this will occur unprompted.

Currently, the sum of NDCs is inconsistent with the Paris Agreement objective of limiting the increase in global average temperatures to well below 2°C relative to pre-industrial times, targeting 1.5°C. Even if all of the NDCs are met, we are still on course for a 3.2°C increase, which would not avert the worst effects of climate change and may breach tipping points resulting in runaway global warming. Further, most countries are not even on track to meet the low bar of the current NDCs.

Citizens need to hold their leaders to account to ensure that they increase their NDCs in line with the Paris Agreement and that they put in place concrete plans for achieving these targets. In some countries — such as Australia, Brazil and USA — this is even more important given the alarming rhetoric and poor environmental record of their leaders. In the USA, the primary goal would be to immediately reverse the process to withdraw from the Paris Agreement, which Trump formally commenced in November 2019.

In 2019, Greta Thunberg demonstrated how powerful a democratically voiceless cohort of society can be. Imagine what would happen if voters around the world mobilised in the same way as schoolchildren have. We urgently need to strike fear into politicians’ hearts before delegates are sent to COP26 later this year — the planet cannot afford COP26 to be a flop like COP25 was.

There will plenty of opportunities to get involved over the year. Your degree of commitment and your means of protest is entirely up to you — the most important thing is to add your voice to the movement.

Aside from emissions reduction targets, there are plenty of other worthy environmental campaigns to support, such as halting deforestation and limiting single-use plastic. Patagonia has launched a platform to help people find local grassroots campaigns called Action Works.

4. Plant trees and restore ecosystems

Nature can be a powerful ally in the fight against climate change, but only if we let it. Healthy ecosystems can help lock away carbon, reduce biodiversity loss and provide myriad other benefits.

A 2019 study found that planting trees is the cheapest and most effective way to mitigate climate change and identified land that could support 1.2 trillion trees without encroaching on farmland or urban areas.

The concept seems to be catching on, with political parties in the UK having an arms (or limbs…) race on tree planting policies leading up to the December 2019 election. The Tories promised 30 million per year, the Lib Dems and Labour promised 60 million and the Greens promised 70 million. Meanwhile in America, a social media campaign called #TeamTrees successfully raised money to plant over 20 million trees.

It is not just about the number of trees that matters. Planting swathes of monoculture forests on unsuitable land could potentially have adverse impacts on biodiversity and be less effective at absorbing CO2. Widescale planting should involve a mix of (ideally) native trees that are suited to the local environment. New woodland also requires a strategy for regular maintenance.

If you’re lucky enough to have a backyard, you can give wildlife a helping hand and fight climate change by planting native trees and shrubs. If not, you can join a tree planting day or perform conservation work with a local charity. There are plenty of opportunities even in cities, for example, Trees for Cities runs planting events in cities across the UK . These events are always rewarding and are a good outdoor workout.

You can also help from the comfort of your own home by donating to environmental charities, which plant trees, restore ecosystems or combat deforestation. There are a number of worthy charities to choose from, so find one that speaks to you. A few examples are listed below:

· Woodland Trust — plants trees and protects woods in the UK to create havens for wildlife.

· Tree Aid — helps poverty-stricken Africans generate an income through planting trees.

· Eden Projects — works with local communities around the world to restore forests.

The Trillion Tree Campaign has created an app, which provides a list of tree-planting charities along with details such as survival rates. It also includes a tracker of progress against the trillion trees target.

Finally, another simple and free way to plant trees is to switch your search engine to Ecosia. They have planted over 79 million trees to date by donating their profits to projects across the world.

5. Fly less

The concept of Flygskam (or flight shame), which encourages people to fly less, has taken off in recent years. Greta Thunberg helped raise awareness by choosing to travel across Europe by train and to America by sailboat. Given the significant CO2 emissions associated with flying, Greta and the Flygskam movement have a valid point.

A single economy class flight from London to New York emits almost a tonne of CO2, which exceeds the entire annual emissions of an average person in 56 counties. A return trip is equivalent to almost 30% of the average European’s current annual CO2 emissions. It is difficult to see how further growth in the aviation industry can be accommodated at the same time as reducing global emissions in line with the Paris Agreement.

A UN scheme called CORSIA aims to ensure that any increase in international aviation emissions above 2020 levels are offset. However, the scheme will not become mandatory until 2027 — the first voluntary pilot phase starts in 2021. Further, there is debate around what offsets will be allowed and some doubt as to how effective these will be.

Some airlines are responding to concerns by going further than the CORSIA agreement. UK based operator EasyJet became the first major airline to commit to offsetting all emissions across its network. Airlines are also working with aircraft manufacturers to develop hybrid and electric aircraft, although these are unlikely to be commercially viable any time soon.

In the meantime, the best thing that you can do is to avoid unnecessary flights. The second best thing you can do is to pay to offset your flights. That great deal you spotted online may not seem such a bargain once you factor in the cost of emissions.

Covering photo credit: Markus Spiske on Unsplash

Enough promises on climate change — it’s time to pay up

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‘The time has come to say fair’s fair; to pay the rent, to pay our share.’

Beds Are Burning, Midnight Oil

Midnight Oil achieved global success in the ’80s with their single Beds Are Burning. You’d probably know it if you heard it. And you’d probably recognise the lead singer — Peter Garrett — with his characteristic shiny head, beanpole figure and wooden-push-puppet-esque dancing style.

Up until then, the Aussie pub rock band had steadily been building a cult domestic following with their politically charged lyrics on environmental issues, consumerism and militarism. But it was ultimately a song about the treatment of indigenous Australians that the world connected with. The chorus ‘how can we sleep while the beds are burning?’ was universally relatable — it was a proxy for the guilt and anger people felt for continuing to their lives whilst injustices happened all around them.

Today, this sentiment is more relevant than ever, as we face the prospect of runaway climate change. With each passing day, there seems to be a growing sense of unease; a feeling that we can no longer sit by as the world slowly burns. Awareness is building and protesters are becoming more fervent. We must take meaningful action to stop climate change — and fast.

The problem is, stopping climate change will require substantial investment and even those who support action on climate change have proven fickle at the slightest hint of the bill arriving.

In 2005, Jørgen Randers was asked by the Norwegian Government to chair a commission tasked with finding a way to reduce greenhouse gas (GHG) emissions by two-thirds by 2050. It was a tough brief, but the commission managed to produce a workable plan that would cost three hundred dollars, per person per year. Despite Norway being the world’s sixth richest nation, the plan received virtually no support from its citizens — people would rather go shopping.

While this reaction may seem selfish, it is consistent with the behavioural economics concept of hyperbolic discounting, where people instinctively discount a future benefit heavily when comparing against an immediate one. The discount tends to be larger still where the future outcome is more uncertain. Hence, the Norwegians felt that avoiding a payment of $300 today was preferable to suffering larger (but uncertain) losses from climate change over the coming decades.

When a more appropriate discount rate is applied, numerous studies — such as the landmark Stern Review — have shown that the benefits of mitigating climate change greatly outweigh the cost.

The Norwegian example highlights the inherent challenges with implementing the measures that are required to tackle climate change — asking people to defer consumption is a hard sell.

Setting a price on carbon

The most efficient and least disruptive way to significantly reduce GHG emissions is to use market-based mechanisms, especially carbon taxes. Nobel Prize winning economist Michael Spence emphasised the importance of carbon pricing in an interview with Business Insider, ‘there are relatively few things that are almost unanimously agreed upon among economists, but this is surely one of them.’

The International Monetary Fund’s (IMF) October fiscal monitor report reiterated the efficiency of market-based mechanisms and cautioned that it would be difficult to achieve emissions reduction targets without them. The IMF concluded that global carbon taxes of $75 per tonne or similarly ambitious policy measures are needed to meet the Paris Agreement.

While carbon taxes are lauded by experts, some reject the concept of market-based mechanisms on the grounds that capitalism and the quest for unlimited growth got us into this mess in the first place.

Taking a more objective view, under a capitalist economy, markets are simply a collection of billions of actors making trillions of decisions to find optimal solutions within a set of constraints. Admittedly this can result in perverse and downright unjust outcomes. However, if we were to tweak capitalism to make it more inclusive, for example through adding new environmental constraints, then markets could be a powerful ally in the fight against climate change.

Despite the benefits of market-based mechanisms, most countries either do not price carbon at all or they underprice it. The global average carbon price is $2 per tonne, well short of the IMF’s $75 minimum. This amounts to a global market failure — participants are continuing to make decisions that would be sub-optimal if they were made accountable for the environmental cost of their actions.

How does a carbon tax work?

A carbon tax is essentially a market constraint that incentivises businesses and consumers to change their behaviours to minimise CO­2 emissions. The tax is levied on heavy emitters, but the effects spread throughout the economy.

For example, let’s assume that one tonne of CO­2 is emitted per tonne of cement produced. Now, let’s say that applying a new production method would enable a 50% reduction in CO2 emissions, but would increase production costs by $25 per tonne. In a competitive market with no carbon price and where cement is a homogeneous good, a producer would lose business if it went it alone and moved to the new method. However, if a $75 carbon tax were applied in this market, it would be optimal for all firms to adopt the new method — as they would save $12.50 per tonne — and the sector’s emissions would reduce.

In practice, until a global carbon tax applies, schemes need be designed to minimise ‘carbon leakage’. There would be little point in taxing the cement producers from the example above if it would just cause them to move to countries without carbon taxes.

Carbon tax designs to date have typically dealt with the problem of carbon leakage with exemptions or rebates, which does little to reduce emissions from the affected sectors.

A new top EU climate official has a better idea — apply a carbon border adjustment tax. That is, imports from countries with a lower (or no) carbon tax would be subject to an adjustment tax equal to the difference. This ensures local producers have a level playing field, but are still incentivised to reduce emissions. Further, it encourages trading partners to implement their own taxes; if their goods are going to be taxed anyway, they might as well be the ones to collect the tax revenue.

Now let’s consider a different example of how a carbon tax affects consumer behaviour. Let’s say you saw a great deal on a flight from London to New York for $225 one-way. By taking that flight you would be responsible for emitting about 1 tonne of CO­2. If a $75 per tonne carbon tax were applied to the aviation industry, your flight would rise to $300 (assuming the tax is fully passed on) — a 33% increase. After the tax, the price would seem less attractive, demand would reduce and airlines would cut flights and increase their focus on hybrid and electric aircraft.

While the above example relates to discretionary spending, carbon taxes also increase the cost of essential goods, such as electricity and fuel prices. For this reason, there is a raft of practical challenges associated with implementing carbon taxes.

Carbon tax challenges

The IMF estimates that a carbon tax of $75 per tonne would increase energy bills by 45% and petrol prices by 15%. Unless carefully managed, such a sharp increase would be overwhelmingly rejected by the public and possibly cause riots.

Governments are acutely aware of the public backlash that even a modest carbon tax could trigger. This prospect makes them reluctant to implement such measures.

For example, the Gilets Jaunes protest movement was triggered by a planned diesel fuel tax increase of 6.5 cents per litre. The increase was a relatively modest 4% of the total cost per litre based on today’s prices, although this was in the context of much larger increase in fuel prices over the preceding 12-month period.

It would be wrong though to jump to the conclusion that these protesters do not care about the environment. For example, 93% of French citizens support targets for the EU to become carbon neutral by 2050. Further, a communique issued by the Gilets Jaunes demanded a fairer climate change transition and made clear that they are not against carbon pricing in general.

Governments should not avoid carbon taxes altogether, but rather they should be cautious as to how they design and implement them. Carbon taxes must include compensatory measures, to reduce the disproportionate burden on poorer households. These measures could include reducing taxes on lower income bands or providing rebates to households for energy efficiency improvements.

The Australian experience — where did it all go wrong?

The Prime Minister of Australia is a position that comes with all of the perks that you might expect — a large salary, two fully-staffed residences in prime locations, a limousine and an official aircraft. If that weren’t enough, the position also comes with the dubious honour of being immortalised in bust form on Prime Ministers Avenue at the Ballarat Botanical Gardens in Victoria. Or at least that was that plan.

Australian politics has generally been fairly stable. Power has shifted every 10 years or so between the two big parties — the Liberals, who confusingly are actually conservatives, and Labor, who are liberals, but sometimes also act like conservatives. However, after an 11-year stint by Liberal Prime Minister John Howard, there was a volatile period, which saw the Prime Minister change 6 times over the next 11 years.

This unprecedented period of change caused such a strain on the Ballarat bust tradition that the bequeathed funding dried up and both the current and former Prime Minister remain absent from the park. And it is all linked to climate change, specifically the the quest to to put a price on carbon.

It all started when Kevin Rudd defeated long-standing Prime Minister John Howard in the 2007 election based on a platform of change. Rudd’s campaign promised action on climate change including ratifying the Kyoto Protocol and implementing an Emissions Trading Scheme (ETS). Midnight Oil’s Peter Garrett even won a seat and was made the Environment Minister.

Rudd commissioned a comprehensive review of climate change and worked to set a carbon price via an ETS, but ultimately he didn’t have the numbers in the Senate. After the bill was voted down, the opposition leader — Malcolm Turnbull — announced that he would support the measure, ensuring its success.

A vocal section of the Liberal party, however, was firmly against setting a carbon price and so they triggered a leadership challenge, which Tony Abbott — a self-professed climate sceptic — narrowly won. Abbott immediately withdrew support for the ETS and the bill was defeated a second time and subsequently shelved.

Meanwhile, public opinion of Rudd soured and the Labor Party had their own leadership spill. Rudd was replaced with Julia Gillard in 2010 prior to another election, which Gillard won narrowly by forming a minority government.

With a more favourable Senate position, Gillard was able to implement a simpler carbon tax, starting at AU$23 per tonne. However, there was a sustained lobbying campaign to undermine the tax, which successfully generated strong public opposition.

Rudd replaced Gillard again, but it was a lost cause, as Tony Abbott was swept to power in the 2013 election with the promise to ‘axe the tax’. The carbon tax was revoked on 1 July 2014, just two years after it started.

By 2015, Abbott was so universally disliked that the Liberals switched back to Turnbull who went on to win the 2015 election. However, Turnbull never quite managed to overcome resistance within his party to climate change action and was eventually replaced by Scott Morrison in 2018 — a man who once brought a lump of coal into parliament.

The 2019 election again focussed on climate change. Labor promised stronger action, Liberals ran a fear campaign on what that action would cost. The latter approach was ultimately more successful — particularly in coal-rich regional Queensland — and Morrison won with an increased majority. Perhaps the one consolation to climate-conscious voters was schadenfreude from hearing that Tony Abbot had lost his seat.

It shouldn’t have been like this. Australia has got a lot to lose from climate change, more than most. It faces more frequent and severe floods, heatwaves, droughts and bushfires and also faces the destruction of its national treasures like the Great Barrier Reef.

While the carbon tax design wasn’t perfect, it was effective and well-considered. In its second year, CO2 emissions reduced by 1.4%, which was the largest annual decrease in a decade. Emissions have steadily risen since the tax was abolished in 2014.

The initial design for an ETS was broadly based on recommendations from the comprehensive Garnaut Report and the subsequent carbon tax was a simplified design based on further advice from the Australian Productivity Commission.

The carbon tax included a number of the compensatory measures, such as lowering income taxes, direct offset payments for low-to-middle income households and exemptions for sensitive industries.

Labor’s fatal mistake, however, was underestimating the relative ease at which their opponents and lobby groups were able to influence public opinion. People soon forgot about the compensation they had received, but they were acutely aware of the increase in their energy bills. Meanwhile, they were subjected to a relentless fear campaign — the tax would bankrupt families, destroy jobs and kill the economy.

The very idea of a carbon tax is now so toxic in Australia that even the Greens Party don’t refer to it in their climate change policy. World leaders use Australia’s experience as a textbook example of what not to do.

Could global carbon taxes work in practice?

Fortunately, other regions’ attempts to introduce carbon pricing have fared better than Australia’s. The World Bank reports that 57 different carbon pricing initiatives have either been implemented or are scheduled for implementation. Some of these initiatives have been in force for over a decade. For example, British Columbia’s carbon tax was introduced in 2008 and is widely regarded as a success story.

Momentum seems to be building, which is encouraging, but there is clearly still a long way to go. Only Sweden and Switzerland have a carbon price higher than the IMF’s recommended minimum of $75 and their schemes have less than 40% coverage.

For carbon taxes to have any chance of success at the level required, they must have strong public support. Advocates of climate change action have an important role to play here — support needs to move to the next level of maturity.

It is not enough to demand that governments set ambitious emissions reductions targets, we must also challenge them on how they’ll achieve those targets. If carbon pricing is not a core element of their plans, we need to ask, why not?

If governments try to introduce (or increase) carbon taxes, we mustn’t baulk at the first hurdle. By all means question the fairness of the scheme design, but it would be hypocritical and counter-productive to reject carbon taxes entirely.

If we are genuinely committed to stopping climate change, we must be willing to pay our fair share to make it happen; we must be prepared to make sacrifices.

Or revisiting Midnight Oil’s Beds are Burning: ‘the time has come to say fair’s fair; to pay the rent, to pay our share.’

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Photo credit: Thanks to Christine Roy on Unsplash

The Decisive Decade – Our final shot at mitigating climate change

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Climate change is an existential threat and a great moral challenge. We have known this with confidence for decades:

  • Scientists first discovered the ‘greenhouse effect’ in the 19th century[1];
  • Scientific advisors warned the US President in 1965 that it “could be deleterious” for humans[2];
  • By the 1980’s it had become a mainstream issue[3]; and
  • In 1988, NASA scientist James Hansen told a US Senate Committee that there is clear evidence that the greenhouse effect “is changing our climate now”[4].

Despite the gravity of the situation, we have not made meaningful progress in combating climate change over the last 50 years – since 1970, global annual CO2 emissions have more than doubled[5], largely driven by population and economic growth[6]. Global average temperatures have already increased by 1°C relative to pre-industrial levels[7].

Time is running out. The next decade will be decisive – if we don’t step up, our ability to mitigate climate change will permanently slip beyond our reach. Global CO2 emissions need to halve by 2030 (relative to 2010 levels) and then fall to net zero by 2050 if we are to limit warming to 1.5 °C above pre-industrial levels[8]. To put the enormity of the challenge in context, global emissions increased by 3% in 2018[9].

To have any chance of achieving the required reduction in emissions, we must first understand the reasons for our lack of progress to date. We can then rectify these weaknesses in our future strategy.

This article discusses:

  1. Our experience over the last half-century
  2. Drivers of our lack of progress to date
  3. The role of the Paris Agreement
  4. Prognosis of meeting the Paris objectives
  5. Is it time to declare a climate emergency?
  6. What can you do?

1.  Our experience over the last half-century

While there have been some positives in the fight against climate change over the last 50 years, the chart below of annual global CO2 emissions is telling. By all logic, the line should have levelled off and started reducing after the 1980’s, when we became fully aware of the serious nature of climate change and how to mitigate it, but instead it has increased relentlessly.

Figure 1 – Historical global annual CO2 emissions 1900 to 2015

Source: Analysis of data from the Carbon Dioxide Information Analysis Center (CDIAC)

Global annual CO2 emissions have more than doubled since 1970. Granted, the global population also doubled over that period[10], which hasn’t helped (as discussed in a previous post), but regardless, we should have managed to significantly reduce per capita emissions by now. Figure 2 indicates otherwise.

 Figure 2 – Historical CO2 emissions per person for selected countries/regions


Source: Global Carbon Atlas, timeline view of territorial tCO2 emissions per person.

There has only been a marginal reduction in per capita emissions in the EU and the USA since 1970. Further, we observe disparity amongst developing nations – in 2017, Australians and Americans emitted more than twice as much CO2 per person as their European counterparts.

Another key observation is that there has been a sharp increase for China and Japan, corresponding to their respective economic boom periods. Meanwhile, per capita emissions are slowly, but surely increasing in India as its economy grows.

These results demonstrate that we haven’t been able to significantly reduce per capita emissions nor break the link with economic growth. Until we achieve this, it is inevitable that emissions will rise as the global population and economy grow.

2.  Drivers of our lack of progress to date

We have known about the significant threat that climate change poses for more than 50 years, but still we have failed take meaningful action. Taking an outside view, this seems irrational, reckless and out of step with how humanity usually deals with its problems. So, there must be a good reason for it.

Some would argue that climate change is just too complex and difficult to solve, that carbon is inextricably linked with our economy and lifestyles and so decarbonising is virtually impossible. But humanity has previously solved large complex issues countless times in history and people have shown a remarkable ability to sacrifice when called upon (e.g. during natural disasters and world wars), so that can’t be the full story.

Lobby groups and influential individuals with vested interests have no doubt played a huge part in hindering progress. But then again, although lobby groups are powerful, they have been overcome in the past – for example, the public health campaign against smoking has been relatively successful in overcoming lobby groups over time.

I believe that main reason we haven’t seen any meaningful progress is due to the long-term and abstract nature of the issue. The worst effects of climate change will not emerge for decades and the largest contributors and today’s leaders will not suffer proportionate consequences – it is the children of today and the poorest nations who will bear the greatest burden. The BoE Governor, Mark Carney, called this dilemma the “tragedy of horizon” in a speech at Lloyd’s of London on the financial risks of climate change[11].

Humans are not naturally well equipped to deal with abstract problems with such long horizons. We are hard-wired to respond to immediate threats – say, is that a tiger in those bushes? – and to prepare for short-term relatively predictable events, like surviving the winter.

To give an illustration, if an alien leader and its army landed on Earth, clicked its fingers and instantly wiped out half of all animals, then there would be a massive call to arms and we would destroy the threat or die trying.  Yet, in the real world, as we have gone about our daily lives, we have unwittingly and gradually wiped out more than half of the population of wild animals since 1970[12], a fact that has largely been greeted with apathy or in some cases mild alarm, before scrolling on to a cat video.

That doesn’t mean we can’t ever solve climate change. We do not operate solely on instincts and we are able to control our animal urges after all. Indeed, a defining trait of humanity is the ability to contemplate our own existence.

We are therefore perfectly capable of considering and responding to longer term threats to our existence, such as climate change. It is just that doing so is more difficult and requires a deeper level of thinking and planning.

We already apply this type of long-term thinking throughout our lives, for example, when we save for retirement, when we buy life insurance and when we control our expenditure so that we can afford to pay off a 30-year mortgage. The same structure can be applied to mitigating climate change.

For this type of thinking to be successful, however, it requires the following at a minimum:

  1. A clear understanding of the problem or objective – e.g. I need a 30-year mortgage in order to buy this house;
  2. A realistic and measurable pathway to achieving it, so we can control our short-term behaviour – e.g. I need to pay £X each month for the next 30 years.
  3. Clear consequences of straying from the pathway – e.g. if I fall behind in my mortgage repayments, the bank will foreclose my property.

In terms of mitigating climate change, we have reason to be both hopeful and fearful. Hopeful, because we already have all of the tools and information to support the requirements above – we have extensive research and a framework for global co-operation. Fearful, because collectively we do not seem to clearly understand all three requirements and have not fully committed to them.

3. The role of the Paris Agreement

The Paris Agreement is the single most important framework that we have for mitigating climate change.

At the 21st Conference of the Parties of the UNFCCC in Paris on 21 December 2015, 196 state parties agreed to a long-term goal of keeping the increase in global average temperatures to well below 2°C relative to pre-industrial times and to limit the increase to 1.5 °C. The agreement has since been widely referred to as the Paris Agreement.

The target of 1.5°C was explicitly referenced, as it is the upper limit of warming of what climate scientists consider to be “safe”. The risks of going even 0.5 degrees beyond this are significant – at 2°C, it is extremely likely that we will lose our warm-water coral reefs forever along with other sensitive and threatened ecosystems (e.g. in the artic region)[13].

Aside from setting a clear direction, the long-term goal of the agreement sends a signal to financial markets, so that the emissions reduction pathway can be factored in when making investment decisions. This is important to facilitate the transition to a low carbon economy in an orderly manner.

Under the Paris Agreement, each country must determine their own reduction targets, called Nationally Determined Contributions (NDCs), that are in line with achieving the wider objective of the Agreement.

The NDCs are required to be “ambitious” and “represent a progression over time”[14]. They are re-evaluated every 5 years and are subject to a global stocktake[15].

The Paris Agreement is far from perfect, however, and does not guarantee success. Major criticisms include:

  • Signatories have too much autonomy in setting their NDCs;
  • There is no enforcement mechanism; and
  • NDCs are non-binding under international law.

To continue with the previous mortgage example, it is a bit like a bank telling the borrower to set their own repayment plan, not checking if the proposed pre-payments are sufficient and then not taking any action if the borrower misses their repayments. While that sounds wonderful from a borrower’s perspective, it is not viable and would cause the bank and possibly the wider economy to collapse.

In a similar vein, the fundamental flaws of the Paris Agreement leave it susceptible to rent-seeking behaviour and hence reduce the likelihood of success.

If we compare the Paris Agreement against the three requirements to solve a problem with a long horizon discussed in the previous section, it does not perform well.

In summary, while the Paris Agreement is an important step and is the best shot that we have at mitigating climate change, it has fundamental flaws and so it is by no means certain that it will achieve its objectives. This means that significant efforts are still required to ensure that the world remains on track to reducing emissions.

4. Prognosis of meeting the Paris objectives

In order to limit the increase in global average temperatures to 1.5°C, in line with the Paris Agreement objective, global CO2 emissions need to almost halve by 2030 (relative to 2010 levels) and reach net zero by 2050[16]. This assumes an ‘orderly transition’ pathway, which minimises the cost of decarbonising the economy as well as avoiding the high future costs associated with the physical impacts of climate change.

Based on the experience and commitments to date, the prognosis of meeting the Paris Agreement objectives is not good. The world is currently heading towards warming of more than 3°C and that’s if countries meet their targets and do not withdraw from the agreement. The difference between 1.5°C and 3°C may not sound like much, particularly given the daily fluctuations in temperatures we experience, but the outcomes are worlds apart (see figure 5).

This result probably does not come as a surprise given our historical lack of progress with reducing CO2 emissions and the limitations of the Paris Agreement discussed previously. There are three key areas of concern:

  1. The pledges/NDCs are not strong enough – the combined NDCs translate to more than 3°C warming by 2100[17], as shown in the chart below.
  2. Most countries are not even on track to meet the low bar – Only 6 of the G20 nations, which together account for c80% of global emissions, are on track to meet their NDC targets: Brazil, China, Japan, India, Russia and Turkey.
  3. The USA has withdrawn from the Paris Agreement – Donald Trump withdrew the USA, which is the second largest emitter of greenhouse gases, from the Paris Agreement[18] in 2017. It is conceivable that other nations could withdraw following changes in political tides.

Figure 3 – Gap between current targets and the required emissions reduction pathway

Source: “Emissions Gap Report 2018”, United Nations Environment Programme

While the progress to date has been poor, there is still hope – signatories are due to review and update their NDCs next year. If there is enough pressure and momentum, then nations are likely to strengthen their targets to be more consistent with the required emissions reduction trajectory.

There some encouraging signs. For example, the independent adviser to the UK government on climate change (the CCC) recently recommended that the UK adopts a legally binding target of net zero emissions by 2050[19]. If the recommendation is adopted, the country that unleashed the problem of climate change on the world through the industrial revolution, will be one of the first major emitters to stop contributing to it, which has an almost poetic symmetry.

France, Sweden, Denmark, the wider EU and the state of California have also proposed (though not agreed) a target of net zero greenhouse gas (GHG) emissions by 2050, while New Zealand is currently considering a similar target.

The IPCC also explored scenarios where it takes longer for global emissions to peak – it calls these ‘overshoot’ scenarios. Under these scenarios, it is still theoretically possible to limit warming to 1.5°C, but these place large reliance on as yet unproven methods to generate large negative emissions after 2050. So, in a way, they just kick the can down the road for the next generation to deal with and rely on a technological breakthrough. Figure 4 below shows a range of scenarios.

Figure 4 – Pathways consistent with limiting warming to 1.5°C warming

Source: “Global Warming of 1.5°C – An IPCC Special Report” IPCC, 2018.

In conclusion, although there is still hope, the situation is grave. At this point, the most likely outcome is that the world is heading towards more than 3°C warming by 2100. We effectively only have a decade to get GHG emissions under control if we are to limit warming to 1.5°C – even the longest overshoot scenarios shown in Figure 4 require emissions to peak before 2030. If we don’t drastically change course within the next decade, a 1.5°C world will slip beyond reach. Considering the scale of the challenge and the relatively long lead time to finance and implement new technology, it will be the fight of our lives.

5. Is it time to declare a climate emergency?

When a long-term plan looks set to fail, one effective strategy is to declare a crisis, which makes the problem more immediate and hence naturally easier to respond to.

Some groups would argue that declaring a climate crisis is exactly what we need. Extinction Rebellion, a climate activist group, ran a 10-day campaign of organised civil disobedience over April in London[20]. Their demands[21] are: (i) to declare a climate emergency and communicate the urgency of change; (ii) to halt biodiversity loss and reduce net greenhouse gas emissions to zero by 2025; and (iii) to create a citizens’ assembly that effectively gives control of the issue to an independent body thus making it apolitical.

The media paints Extinction Rebellion as an extreme group, but their core demands certainly don’t seem that way, except perhaps for their proposed emissions reduction trajectory, which is steeper than the IPCC 1.5°C pathway.

Elsewhere, Greta Thunberg, a schoolgirl from Sweden, inspired students across the globe to strike to demand action on climate change[22]. In a speech to UK members of parliament (MPs)[23], Greta passionately explained the disproportionate effect that climate change will have on her generation and the need to declare a climate crisis.

Following these events, UK parliament approved a motion to declare an environment and climate emergency[24]. However, the motion does not legally oblige the government to act and is hence largely symbolic.

Declaring a global climate emergency could give the issue the urgency it needs to put stronger, binding and consistent targets in place to achieve the objectives of the Paris Agreement. Sure, there is a risk that this will be seen as alarmist, but the risk of continued inaction through apathy is arguably higher at this point.

The table below highlights some of the physical effects of climate change under different warming scenarios and is a stark reminder of what is at stake. The next decade will determine what future world Greta and her generation will live in.

Figure 5 – Effects of different warming scenarios

Analysis from multiple sources, including: (i) “The heat is on Insurability and  Resilience in a  Changing Climate” CRO Forum, January 2019; (ii) “Avoiding the impacts of dangerous climate change” Avoid2 climate change research programme UK; (iii) Springmann, et al. (2016) “Global and regional health effects of future food production under climate change: a modelling study” The Lancet, Volume 387, ISSUE 10031, P1937-1946; (iv) “Global Warming of 1.5°C – An IPCC Special Report” IPCC, 2018; (v) “Climate Stabilization Targets: Emissions, Concentrations, and Impacts over Decades to Millennia” (2011) National Research Council.

An orderly transition to a 1.5°C is the best-case outcome, for the planet, our wellbeing and the economy – we must do all we can to achieve it.  

To maintain the status-quo and continue on a 3°C or higher trajectory would be to knowingly inflict millions of additional deaths, more frequent natural disasters and crippling costs on the poorest nations and future generations, which to me, seems morally repugnant.

6. What can you do?

If you’d like to make sure we get back on track to meeting the objectives of the Paris Agreement, there is a lot you can do to help:

  1. Influence your political leaders and vote – it is essential that countries strengthen their pledges/NDCs in the next round and take greater accountability in meeting them. Leaders are elected by the people, so if you make climate change a top issue, then they’ll have to listen. If you are in the USA, then campaigning to re-join the Paris Agreement is the first priority.
  2. Consider ESG criteria for your investments (this is not financial advice) – money talks; a redirection of investments from fossil fuel projects to renewables would go a long way to supporting the transition to a low-carbon economy. If this issue is important to you and/or if you are concerned about the viability of carbon-intense business models in a Paris Agreement world, then consider your various investments (e.g. your pension or superannuation). Most providers offer various investment options that impose minimum environmental, social and governance (ESG) criteria and/or only invest in companies that have Paris Agreement compliant business models. Consider speaking to a financial adviser before making any decisions.
  3. Reduce your impact – the actions of one person can quickly grow into a movement that changes the world. Setting your own emissions reduction plan will contribute to the solution. I will write articles on this topic in future.

References

[1] Joseph Fourier discovered the existence of the greenhouse effect in 1824. The argument was strengthened by Claude Pouillet in 1827 and further evidence was provided by Eunice Newton Foote in 1856.

[2] “Climate Science, 50 Years Later”, American Association for the Advancement of Science, October 2015

[3] Climate change reached the front page of the New York Times on August 22, 1981. “Study finds warming trend that could raise sea levels”.

[4] “Scientists say greenhouse effect is kicking in”, Washington Post, June 24, 1988

[5] “Global Carbon Dioxide Emissions”, Carbon Dioxide Information Analysis Center (CDIAC)

[6] “IPCC Fifth Assessment Report on Climate Change.” (2014)

[7] “Global Warming of 1.5°C – An IPCC Special Report” IPCC, 2018.

[8] “Global Warming of 1.5°C – An IPCC Special Report” IPCC, 2018.

[9] “CO2 Emissions Reached an All-Time High in 2018”, Scientific American, 6 December 2018.

[10] “World Population Prospects: The 2017 Revision” (2017) UN Population Division

[11] Mark Carney “ Breaking the tragedy of the horizon – climate change and financial stability” Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at Lloyd’s of London, London, 29 September 2015

[12] “WWF Living Planet Report – 2018: Aiming Higher” (2018) Grooten, M. and Almond, R.E.A.(Eds).

[13] “Global Warming of 1.5°C – An IPCC Special Report” IPCC, 2018.

[14] Article 3 of the Paris Agreement

[15] Article 14 of the Paris Agreement

[16] “Global Warming of 1.5°C – An IPCC Special Report” IPCC, 2018

[17] “Emissions Gap Report 2018”, United Nations Environment Programme

[18] “Trump Will Withdraw U.S. From Paris Climate Agreement”, The New York Times, 1 June 2017

[19] “Net Zero: The UK’s contribution to stopping global warming”, Committee on Climate Change, May 2019

[20] “Extinction Rebellion: London climate protest” BBC News, 24 April 2019, https://www.bbc.co.uk/news/uk-england-london-48044056

[21] Extinction Rebellion, ‘our demands’, https://rebellion.earth/the-truth/demands/

[22] “Global Climate Strike: Meet the teenagers skipping school to fight for a greener planet”, CNN, 15 March 2019        

[23] “’You did not act in time’: Greta Thunberg’s full speech to MPs”, The Guardian, 23 April 2019

[24] “UK Parliament declares climate change emergency”, BBC News, 1 May 2019