Green but foolishly mean

Acting too conservatively on climate change will traumatise the Australian economy

Kevin Rudd as Don Quixote riding backwards

The Clean Industrial Revolution: Growing Australian prosperity in a greenhouse age
By Ben McNeil
Allen & Unwin, 2009

Reviewed by Josh Fear

When Kevin Rudd announced Australia's 2020 emissions reduction target of 5–-15 per cent late last year, he justified his government's lack of ambition on economic grounds: 'These targets are appropriate and responsible,' he said. 'They deliver necessary reform to tackle the long–-term challenge of climate change, while supporting our economy and securing jobs during this global recession.'

Rudd's logic was emblematic of a way of thinking that is common in this country, one that assumes there is a clear trade–-off between the environment and the economy. If we want to tackle climate change, the argument goes, there will be economic costs. It is a zero–-sum game, with the climate on one side and prosperity on the other.

It is at this mindset that Ben McNeil takes aim in The Clean Industrial Revolution. McNeil argues that the environment versus economy dichotomy is a false one, and that the material benefits of decarbonising our economy will vastly outweigh the costs. Even if we act purely out of self–interest, without consideration for the rest of the world, moving towards a low–carbon future is the rational course of action.

McNeil's approach is somewhat different from that taken by Sir Nicholas Stern and Ross Garnaut. Theirs was a ledger–style analysis, with the costs of action (i.e. a carbon price) compared with the costs of inaction (such as an increase in extreme weather events). When both sides of the ledger were tallied, they found that action was the better option.

McNeil, by contrast, describes what will happen when the rest of the world adopts a carbon price which properly accounts for climate impacts. If Australia lags behind, adopting weak targets and continuing to rely on cheap coal for exports and domestic energy, then we will be increasingly uncompetitive in the global marketplace. If, instead, we direct our efforts towards developing a renewable energy base, then enormous economic benefits will ensue. In fact, putting a price on carbon will drive technological and economic innovation in ways that are scarcely predictable now.

According to McNeil, strong action to reduce greenhouses gases is non–-negotiable, for Australia or any other nation. Even without government action, a 'shadow' carbon price will affect business and investment decisions. The question for Australia isn't 'can we cut emissions without hurting growth?' Rather, it is, 'can we grow our economy without cutting carbon emissions?'

If short–term political considerations continue to dictate climate change policy, at some point in the foreseeable future, the Australian economy will be subject to a 'carbon shock', akin to the oil shocks of the 1970s. With a global carbon price affecting the value of all Australian goods and services — not just energy–-intensive ones — we will find ourselves at an international disadvantage. The sooner we act to reduce our dependence on carbon, the less traumatic this transition will be.

McNeil argues that the oil shocks of the 1970s were a hidden blessing because they focused the world's attention on alternative energy sources — well before people understood the risks of climate change. He quotes the head of the International Energy Agency, Claude Mandil: 'Oil price shocks in the 1970s and the resulting energy policies did considerably more to control growth in energy demand and carbon dioxide emissions than energy efficiency and climate policies implemented in the 1990s.' In the same way, a global carbon shock will result in massive change in favour of renewable energy. The only question is when this will occur.

Indeed, the progressive energy policies of a number of European nations, particularly Denmark, the wind–power capital of the world, can be traced to the oil price spikes of the 1970s. Australia needs to emulate this forward–looking approach by investing heavily in renewable forms of energy and turning away from our dependency on coal.

McNeil believes that Australia can become the 'new Saudi Arabia', by which he means the energy superpower of the 21st century. Just as the Saudis dominated global energy supply in previous decades, other nations will come to control the clean energy market as the era of climate change unfolds. Those countries that act early and decisively will have a considerable advantage over the slow movers in this race.

Looking forward to 2050, McNeil envisions a future in which Australia leads the world in the development and distribution of clean technologies. Australian scientists will be at the forefront of the green revolution; their inventions will harness Australia's abundance of sunlight and geothermal energy, driving sustained economic growth. With so much global demand for green innovation, Australia's global diplomatic standing will grow, earning it a permanent seat on the UN Security Council.

This is an extraordinarily optimistic picture of Australia's future. Many of us would like to believe that Australia will indeed grasp the green–market opportunities that are emerging throughout the world. Yet the politics of climate change in this country provide a stark warning against being too confident.

At the risk of stating the obvious, let's remind ourselves of the obstacles to a clean industrial revolution in Australia. The current government has announced emissions reduction targets, which are inconsistent with avoiding dangerous climate change. It plans to give incredibly generous compensation to the biggest polluters (up to 95 per cent of the cost of carbon permits), even though these companies have seen the climate crisis coming for at least a decade.

On the other side of politics, the alternative government is riddled with climate change sceptics, and is apparently incapable of advocating on behalf of any constituency besides the business community. Moreover, neither Labor nor the Coalition is ready to accept that there may be immediate economic benefits associated with adopting a carbon price. Instead, both remain locked into the environment versus economy mindset.

This is the short–term picture; the politics of climate change may move considerably in a few short years. But until the opportunities of a green economy become more widely understood, it is unreasonable to expect our leaders to adopt the kinds of visionary policies advocated in The Clean Industrial Revolution.

How we might shift the politics of climate change is of course the critical question.

Ben McNeil believes that we must encourage 'accidental environmentalists': investors and entrepreneurs who adopt a green business model not for the sake of the planet, but because there is a dollar to be made. 'We must find a way to make James Packer and Andrew Forrest into accidental environmentalists. If we get to the point where Gordon Gecko…is putting his money in clean technology start–up firms, then we are on the path to solving climate change.'

Alex Steffen, the editor of Worldchanging magazine has called this kind of approach 'bright green'. He contrasts it with a 'dark green' philosophy, which would involve a radical change in lifestyle and culture to address the environmental crisis.
A bright green approach relies on the promise of new technology and green consumerism to solve climate change. This form of environmentalism is clearly more palatable to the general population, in rich and poor nations alike. It also sounds so very seductive.

Unfortunately, there are many barriers, political, social and technological, to achieving a bright green future. Until then, the pursuit of self–interest and the quest to avoid dangerous climate change are not necessarily compatible.

Josh Fear is a research fellow at the Australia Institute, a public policy think tank based in Canberra.