Continued climate change uncertainty costly

The failure of Australia’s political leaders to agree on a way forward to tackle the global climate change threat as embodied by the voting down of the proposed emissions trading scheme (ETS) in the Senate today will have costly consequences.

For over two decades, since the Intergovernmental Panel on Climate Change (IPCC) was first asked to look at the risk posed by climate change, leaders and industry across the world have had a chance to act as the evidence increased and the scientific consensus strengthened that human activity is contributing to the warming of the planet. A warming that the IPCC and others contend could cause catastrophic social, economic and environmental impacts.

Australia has spent a great deal of public money on researching climate change, pulling together report after report for both domestic and international consumption, sending delegates to conferences, and paying the salaries of those in parliament to debate (pettily at best most of the time) and re-debate what should be done.

And business and the community have waited – not sure which way to invest, not sure which technologies to develop, and not sure what action will be demanded of them.

While the potential cost to the economy is often used as a tact to ward off action on climate change, the question of how much public money has been spent over the past 20 years and what benefits could have been generated by having taken action years ago is rarely raised.

Business needs legislative certainty to have the confidence to drive innovation and new market development – without it potentially lucrative opportunities go begging.

Both the Garnaut Review in Australia and the Stern Report in the UK noted taking action later will be more expensive economically speaking then moving quickly.

But now due to considerable energy put into lobbying efforts by big business likely to be affected by an ETS in Australia, continued climate change denial by several politicians, and the unfortunate political machinations of the Liberal Party, the waiting will now go on.

And that spells extra cost of the kind that shows on the bottom line and also in discussions of opportunity loss.

Yet, aside from the arguments around cost / benefits to the broader macro-economy climate change has generated, this week’s outcome also raises the question – what is the cost to the Australian public purse of being forced to wait longer for certainty on climate change action? How much does it go up every month we wait?

Regardless of what happens in international negotiations for a replacement to the Kyoto Protocol in Copenhagen this month – where Australia will now present itself as somewhat of a free-loader with little legitimacy to argue for anything to be done by other nations both developed and emerging or position itself to gain a more favourable outcome – it is likely another round of politicking and lobbying will ensue when parliament resumes next year.

And whichever way you spin it, the continued uncertainty equals extra cost to the tax payer.