ON FRIDAY the Paris climate change agreement will come into effect but Australians may not notice until it’s too late.
In fact, some warn we are unprepared for the changes that the agreement will bring — even though Australia has yet to ratify it.In a possible taste of what’s to come. Australia’s ‘dirtiest’ power station announced on Thursday it would be closing, leaving hundreds in Victoria’s Latrobe Valley out of work.
The Climate Institute said the federal government’s reluctance to plan for Australia’s transition to net zero emissions was setting up more shocks for communities like those around the Hazelwood coal-fired power plant.
“This is why we need a nationwide plan,” The Climate Institute CEO John Connor said.
“If we plan and invest ahead of time we are better placed to cope with the challenges of the inevitable transition. Without this our communities will face much more stress, our energy system will face continued shocks and investment in clean energy will face ongoing uncertainty.”
Why the agreement is important
The Paris Agreement was signed by 197 parties in December 2015 and it aims to keep global warning to well below two degrees above pre-industrial levels.
It was due to come into force once it was ratified by at least 55 parties to the convention, accounting for an estimated 55 per cent of the total global greenhouse gas emissions.
Australia signed the agreement but has not ratified it because it has yet to pass through Australia’s Parliament.
“On a per capita basis, that’s one of the highest in the G20,” he told news.com.au.
Ratification of the agreement was held up by the election campaign this year and it is currently with the Joint Committee on Treaties.
However, other countries have ratified the Paris Agreement so it will come into effect on Friday, November 4.
“This is a truly historic moment for people everywhere. The two key thresholds needed for the Paris Climate Change Agreement to become legal reality have now been met,” Patricia Espinosa, executive secretary of the UN Framework Convention on Climate Change said in October.
Risk to business
While ratification does not mean the agreement becomes binding, it will change things.
Experts have been warning of the risk to businesses and to people’s superannuation for a while now.
During a recent visit to Australia, Bank of England veteran Dr Paul Fisher reportedly warned that climate change had moved from being a social moral issue to being a business risk.
He pointed to the collapse of US coal giant Peabody Energy after a sharp fall in coal prices left it unable to pay its $US6.3 billion debt.
He also noted that China (which has ratified the Paris Agreement) was investing $US600 billion in green finance projects. China’s transition from a coal-hungry economy to a clean one, could leave Australian industry exposed. “If they’ve not woken up to that, that’s worrying,” Dr Fisher told Fairfax.
This week the Centre for Policy Development released a new legal opinion that warned directors who did not adequately consider the impact of climate change risks on their business could be held personally liable for breaching their duty of care and diligence under the Corporations Act.
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A history of heavy
dependence on burning coal for energy has made China the source of
nearly a third of the world's total carbon dioxide (CO2) emissions.
China's government has publicly set 2030 as a deadline to reach the
country's emissions peak, and data suggest the country's coal
consumption is already in decline. Picture: Kevin Frayer/Getty Images Source: Getty Images
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Authors of the legal opinion, barristers Noel Hutley SC and Sebastian Hartford-Davis wrote: “It is likely to be only a matter of time before we see litigation against a director who has failed to perceive, disclose or take steps in relation to a foreseeable climate-related risk that can be demonstrated to have caused harm to a company (including, perhaps, reputational harm).”
Market Forces executive director Julien Vincent wrote in a Fairfax column this week that companies seemed “woefully unprepared” for the changes the Paris Agreement would bring.
Impact on Australians
But the risks of climate action are not just confined to businesses. There are also fears that superannuation and other investments will take a hit.
Canadian author and activist Naomi Klein underlined the risk during a visit to Australia last year, saying 80 per cent of proven fossil fuel reserves needed to stay in the ground if the world was to meet the 2C warming target.
“We see that fossil fuel companies have five times more carbon in their proven reserves than is compatible with life on Earth,” Klein said.
If mining companies had to leave their resources in the ground, this could deliver a hit to their finances, and to people’s superannuation, much of which is invested in mining stocks and other climate change exposed industries.
Professor Ken Baldwin, director of the ANU Energy Change Institute, told news.com.au the Paris Agreement could also see Australian products become more expensive overseas.
“As momentum builds and more countries introduce carbon pricing mechanisms, there will be a push towards harmonising this globally,” he said.
“This means if countries (like Australia) do not price carbon, they will be left out of such arrangements and then there might be economic pressures when exporting to other countries.”
For example, if Australia doesn’t introduce a carbon-pricing mechanism, other countries buying its resources like coal could decide to impose their own charge, pushing up the price of Australian products overseas.
This could also apply to any goods made using carbon-intensive electricity.
“We are yet to see the ramification of how this will play out,” Professor Baldwin said.
He said just looking at a map of all the nations that have already ratified the agreement highlighted the risk.
“It includes all our big trading partners: the US, China and EU,” he said. “Virtually all of North America, South America, vast areas of Asia, all of Europe except the UK and bits of Africa.
“Even our near neighbours including New Zealand, the Pacific Islands, Papua New Guinea and Indonesia.”
It won’t happen overnight ...
Professor Baldwin said it would take time for changes resulting from the ratification of the Paris agreement to be felt.
Each country will introduce their own mechanisms to meet their targets and this won’t produce a reduction in carbon based assets overnight.
“I don’t expect anyone will notice anything after midnight Friday but gradually we will have to invest in ways to reduce carbon pollution, which will inevitably cost all economies a certain price, but this will pale into insignificance compared to the cost of doing nothing on climate change,” he said.
We must act
Climate Council CEO Amanda McKenzie said progress made globally stood in stark contrast to the lack of action at home.
“Australia has taken no new concrete steps, legislative or otherwise, since Paris to pursue the goals of reducing our emissions or increasing renewable energy,” she said.
“Countries like the US have taken major steps forward as President Obama and Secretary Clinton have made clear that clean energy is a big part of America’s future economy and jobs.”
Professor Will Steffen of the ANU Climate Change Institute, said Australia needed a plan to transition rapidly away from coal towards renewable energy.
“The upcoming 2017 review provides the opportunity to take stock and admit the obvious: that what we are doing is not working,” he said.
“The ratification of the Paris agreement is further proof of the world’s commitment to tackling climate change.
“Australia must cut its greenhouse gas emissions much more deeply and rapidly to contribute its fair share in meeting the climate change challenge.”
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