Chapter 4 - Arguments against ratification
Australia's ratification would make no difference to the coming into effect
of the Kyoto Protocol
4.1
The Kyoto Protocol will come into effect under international law 90 days
after a minimum of 55 countries, representing at least 55% of 1990-level
greenhouse gas emissions of Annex I Parties (developed countries and economies
in transition), have ratified it. While 120 countries have ratified the
Protocol to date, their combined emissions at 1990 levels represent only 44.2%
of emissions, well short of the required 55% emissions threshold. The only two
countries whose emission levels would help meet the threshold are the United
States, with 36.1%, or Russia, with 17.4% of Annex I Parties 1990 emissions.
The United States has indicated it will not ratify the Protocol; Russia's
position is said to be equivocal but at this stage Russia is opposed to
ratification because of the adverse impact ratification would have on the
Russian economy. Australia's total of 2.1% of 1990-level emissions will not
assist in meeting the 55% threshold. If Australia were to ratify, it would be a
symbolic gesture only.
Australia is already committed to meeting its emissions target, whether it
ratifies or not
4.2
Australian Government representatives have advanced the argument that
the main purpose of the Kyoto Protocol is to reduce global greenhouse gas
emissions in order to limit climate change and its impacts. The Government is
committed to meeting its Kyoto target (despite being under no legal obligation)
and is on track to do so. Environment Minister, the Hon Dr David Kemp MP, has
reiterated in Parliament that Australia is 'within striking distance' of this
target.[1]
4.3
In his evidence to the Committee, Mr Ian Carruthers of the Australian
Greenhouse Office (AGO) confirmed that this was the case:
we can see from the latest and regularly published assessment of
Australia's emissions trends that, by the time of the Kyoto target period,
across a range of sectors greenhouse measures in Australia will have delivered
emissions reductions of 67 million tonnes. To put that in context, at the time
of Kyoto it was projected that Australia's emissions, without measures, would
grow to 128 per cent above the 1990 level. With a 67 million tonnes reduction,
the projection is that Australia will be around 110 per cent of 1990 levels. As
the government has said, with the current measures we are within striking
distance of achieving Australia's Kyoto target. With further actions, such as
the government's focus on a good outcome on reductions in Queensland land
clearing, there is every prospect for Australia to achieve its Kyoto target.[2]
4.4
In this context it is interesting to note that the European Union as a
whole and 13 out of 15 of its member states are in danger of not meeting their Kyoto
targets.
The Kyoto Protocol will not be effective in reducing global emission
levels
4.5
It has been estimated that the Kyoto Protocol would reduce global
emissions by about one per cent.[3]
Faced with the enormity of the climate change challenge, this is an
insignificant amount. The principal reason for this modest proposed outcome is
that the treaty proposes legally binding emissions reduction targets only for
developed countries and economies in transition. Developing countries, whose
emissions are projected to constitute 47 per cent of global emissions by 2030,
have no targets and are actively resisting the imposition of targets for future
commitment periods.[4]
This includes both China and India, the second and fifth largest emitters
globally.[5]
Emissions reductions by developed countries alone cannot prevent a dangerous
accumulation of greenhouse gases in the atmosphere.
4.6
Developing countries were spared emissions targets through a recognition
of the fact that they had every right to pursue economic development and
through a tacit acceptance of the fact that developed countries were primarily
responsible for the climate situation in which we find ourselves. This
situation is clearly untenable in the longer term. The International Energy
Agency (IEA) predicts that energy demand in 2030 will have increased by two
thirds over current usage, and that fossil fuels will continue to dominate
energy production as they are relatively cheap and convenient. Modernisation of
developing country economies depends on the provision of infrastructure for
energy supply and the consequences of rapidly expanding energy demand will
include increased emissions of greenhouse gases.[6]
4.7
Compounding the problem of the lack of targets for developing countries
is the likelihood that some at least of the Annex I countries will fail to meet
their proposed targets. A press release from the European Commission dated 2 December 2003, relating to a progress report on greenhouse gas emissions, concluded
that 13 out of 15 member states would miss their emissions reduction targets.
The Kyoto Protocol will harm Australian industry
4.8
If Australia were to ratify the Kyoto Protocol, it would take on
obligations not shared by its regional trading competitors. It has been
speculated that if the Kyoto Protocol came into effect it would result in
'carbon leakage', with investments in smelters and refineries, mining and
petrochemical projects going to developing nations not subject to emissions
reduction targets.[7]
4.9
Much of Australian industry is highly dependent on the production
of energy and greenhouse intensive goods. In evidence to the Committee, many
representatives outlined how they might be affected should the Kyoto Protocol come into effect. Woodside Energy submitted:
Australian trade-exposed, energy intensive
industries would suffer competitive disadvantage from developing nations
without emission targets under the Protocol and from the US which has elected
not to ratify the Protocol. Competitors in these nations attract no additional
production costs imposed by their governments to achieve compliance. This
competitive disadvantage is illustrated clearly by the LNG export industry, in
which almost all of Australia’s competitors for new contracts are located in
non-Annex B countries in Asia and the Middle East.[8]
4.10 The Australian Chamber of Commerce and Industry (ACCI) shared similar
concerns. It submitted:
A fundamental concern for Australian industry is
that a number of our competitors do not have binding abatement targets under
the current Kyoto Protocol rules. Consequently, these nations will not see a
price signal within their domestic industries and will be able to enter global
markets with lower cost structures. The scenario that Australian Governments
must mitigate against is the situation where domestic greenhouse abatement
policies introduce a price signal here that impedes our ability to remain
internationally competitive.
The marginal cost of abatement will cascade
through supply chains – being passed on from supplier to supplier. Ultimately,
there will be a point in the chain where certain trade-exposed domestic
industries will be unable to pass on the marginal cost as imported products
will be less costly.[9]
4.11 A similar theme
was taken up by the Plastics and Chemicals Industries Association (PACIA),
which referred to the energy intensive nature of the sector:
Changes to the cost of energy, and costs associated with
emission controls, will affect competitiveness. Many competing suppliers are
based in Asia and other developing countries where there has been substantial
investment in recent years in larger plants which achieve scale economies not
realisable in a market the size of Australia. A loss of competitiveness, even
due to shorter term market changes, can result in long term loss of market share.[10]
4.12 The Australian
Aluminium Council (AAC) also referred to the impact of ratification on the
aluminium industry’s international competitiveness:
the world market price for aluminium will be dominated by the
availability of metal from countries without obligations under the Kyoto
Protocol (non-Annex 1) or countries that don’t intend ratifying (at least the
US) or countries who will be large sellers of ‘hot air’ (Russia and Eastern
Europe). Consequently, any increase in energy prices to the aluminium industry
in Australia as the result of policies to abate greenhouse emissions cannot be
passed on to aluminium customers.[11]
Cost-benefit analyses suggest that the costs of the Kyoto Protocol exceed
its benefits
4.13 This is an
inherently complex issue. Assumptions about the rate of emissions growth
depend on factors that are difficult to predict accurately: such as population
growth, productivity growth within different industries, and fossil fuel
prices. The Protocol takes the position that the risks posed by climate change
are so great that emissions must be reduced at any cost. Not all agree. It has
been asserted that the fear of taking on a disastrously expensive commitment
was one of the reasons for the nearly unanimous opposition the Protocol faced
in the US Senate.[12]
4.14 On this issue,
analysts McKibbin and Wilcoxen concluded:
the treaty implicitly adopted the position that the risks posed
by climate change are so great that emissions must be reduced no matter what
the cost. However, too little is known about the dangers posed by climate
change, and about the costs of avoiding it, to draw that conclusion. Nor is
there any evidence that the targets set by the protocol are the optimal levels
of greenhouse gas emissions, either for an individual country or for the world
as a whole. If anything, cost-benefit calculations based on studies to date
tend to suggest that the costs exceed the benefits, at least in developed
countries.[13]
4.15 Most analysts
have not even attempted to consider the cost-benefits for Australia in a potential
second commitment period, given the high degree of uncertainty about its nature
and scope.
The volume of greenhouse gas emissions from a given country is not a good
measure of that country's impact on global emissions
4.16 A perceived flaw
in the Kyoto Protocol is that it contains no mechanism to recognise or reward
actions which, although they may cause an increase in one country's emissions,
bring about a net decrease in global emissions. The example frequently advanced
was the recent Australian $25 billion LNG contract with China. This will add
some one million tonnes of carbon dioxide annually to Australian greenhouse gas
emissions, but will reduce China's emissions by some seven million tonnes by
replacing coal-fired power.
The Protocol lacks credible compliance measures
4.17 Those opposed to
the Protocol point to the lack of credible compliance measures as a major flaw
in its design. The main penalty to be imposed on countries which fail to meet
their emissions target is a reduction in emissions target for the post-2012
period – targets which remain to be negotiated and which could be subject to
manipulation. The costs of independent monitoring of emissions levels could
also be prohibitive.
Alternative mechanisms
4.18 The argument
most frequently advanced for ratifying the Protocol is that it is the one
international mechanism that is currently on the table, and that it must be
supported, whatever its flaws, in the interests of being seen to be addressing
the global warming crisis. This is simplistic. The Committee heard evidence
that Australia was actively pursuing bilateral agreements, such as the Climate
Action Partnership with the USA, in which the two countries will collaborate on
climate change science, reduced-energy and renewable energy technology, capacity
building in developing countries and greenhouse accounting in the forestry and
agriculture sectors. Australia is also cooperating with the European Union, Japan,
New Zealand and China on climate change initiatives and is assisting Pacific
nations to build their capacity to adjust to the consequences of climate
change.
4.19 While it is true
that no alternative global approach to addressing climate change is on the
table, the matter has certainly been considered. As Mr Langman told the
Committee:
We have certainly talked at length with a wide range of
countries about how we can build a more global approach that will gradually
draw in a larger number of emitters. We have had discussions on that topic with
the European Commission and Japan. We participate in an informal process
involving key countries – China, India, Brazil, the EC, the United States, Canada
and others – that Japan has organised. There have been two meetings of that
small group. We have discussed this topic with the United States and Canada. It
is in some ways the key topic. In spite of all the formal processes and
procedural issues we dealt with at the ministerial meeting in Milan, it is the
topic that is on everybody's lips. It is what people are thinking about and
talking about. There are no definitive and easy answers yet.[14]
Of course, there is the example of the Montreal Protocol.
Technological solutions
4.20 Part of the
challenge in developing a response to climate change is to do so without
threatening the living standards in developed nations while still accommodating
the natural developmental aspirations of developing nations. Australia has rich
resources of fossil fuels; its energy production is highly fossil-fuel
dependent; and more than 80 per cent of our exports are greenhouse gas
intensive. The clear imperative is to harness technology to enable us to
continue to enjoy the benefits of these assets but to reduce or eliminate
entirely their emissions. In this regard, the Government is supporting the work
of the CSIRO Energy Transformed program which is developing zero-emission coal
technologies involving gasification and geosequestration.
4.21 Many developing
countries are also rich in fossil fuels and will use these resources as the
most cost-effective that are readily available to them to provide basic energy
services. As Mr Langman pointed out in evidence to the Committee:
if there is a massive expansion of fossil fuel, coal based
energy production in countries like India and China over the next 20 to 30
years, we will have a huge task in dealing with the potential climate change
that could arise ... it seems critical that part of the long-term solution
needs to be to work with those countries on the technologies that make a
difference.[15]
Problems associated with Kyoto's flexibility measures
4.22 Emissions
trading was devised as a way of making the cost of Kyoto compliance more
palatable. In order to meet their emissions targets, ratifying countries with a
high emissions load could buy carbon credits (or the right to emit an agreed amount
of fossil fuel emissions) from countries with credits to spare, for example
credits generated by a carbon sink such as a new forest. Traded volumes have
been reckoned at about 71 million tonnes in 2003, with the market price of the
right to emit a tonne of carbon dioxide or its equivalent ranging between $US
4-6.[16]
The problem here is obvious. As Minister for Industry, Tourism and Resources, the
Hon Ian Macfarlane MP, pointed out, 'Kyoto is fundamentally flawed and doesn't
reduce emissions. It simply trades emissions between emitters'.[17]
4.23 The Australian
Greenhouse Office worked on a national emissions trading scheme for some years
but has recently desisted, on the grounds that it was uncertain that the Kyoto
Protocol would be ratified.
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