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The economics of climate change

 

Ross Garnaut

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Matt Smith:

Welcome to a La Trobe University podcast with your host, Matt Smith. And joining me today is Professor Ross Garnaut. He's an eminent Australian economist, best known in recent years as the head of the Rudd government's Climate Change Review Panel recommending serious reduction targets for greenhouse gas emissions.

Thank you for joining me, Professor Garnaut.

Ross Garnaut:

Very good to be with you, Matt.

Matt Smith:

My first question for you is, what do the effects of climate change mean to an economist?

Ross Garnaut:

Well, this is something that first came to my attention in my role as chairman of the International Food Policy Research Institute, which is the world's main research organization dealing with issues of rural development in developing countries. From about four or five years ago, kept on leading us into the problems of instability in agriculture that the mainstream science said would be associated with unmitigated climate change. So that was my first exposure to the issue as an economist.

I didn't become deeply steeped in it as an issue in itself until I was invited by all the state premiers and Kevin Rudd to undertake the Climate Change Review. I was appointed to that role in April of '07 and gave my report to the prime minister and the premiers in September of '08.

And together with a very strong secretariat, I really dug deeply into the issues and I found that the economic effects of unmitigated climate change were very large and extended well beyond agriculture, which was my first interest and in some ways is the most obvious interest. It became clear from that work that as the cost of many kinds of infrastructure were going to rise that there would be costs of extreme events.

And one very important thing for Australia is that there would be slower growth in developing countries in our Asian neighbourhood, which are so important as trading partners, and that would reduce the opportunity for our exports, and that was going to feed back into a major impact on the Australian economy.

So the bottom line was that there would be very large economic damage from unmitigated climate change. It was damage of an insidious kind, gradually creeping up on us and accumulating to very large effects late in this century and getting worse and worse as time went beyond that.

And economists and other Australians, other humans, aren't used to thinking in those time scales, but once the human mind moves to thinking about change that is so large that they disrupt everything, we come to see what happens beyond our own lifetime. So it's being very important.

Now, it's also the task of economists to measure the cost of doing something about it and to try to identify the most cost-effective ways of doing something about mitigation, and that was another major part of my review. That was the work that concluded, while it would not be low cost in an absolute sense to play our full proportionate part in the global effort to prevent dangerous climate change, or at least reduce the risks of it, those costs were moderate compared with, say, cost of leaving the problem developed without mitigation.

That was all the tasks of an economist looking at the cost of unmitigated climate change, the cost of doing something about it and recommending the most effective and cost-effective ways of doing something about it.

Matt Smith:

Well, if we take it back a bit, why did the role to head this panel and to do this report fall to an economist? Do you know what Kevin Rudd's thinking was behind that to approach the climate change issue from an economic standpoint?

Ross Garnaut:

Oh, that's a matter for him and the premiers. The initiative initially came from the premiers who were frustrated that the previous Commonwealth government wasn't taking action, and then Anna Bligh, at the time Treasurer of Queensland, took up the issue with Kevin Rudd, and together they approached me.

I think they saw it as an economic issue because unless Australians were satisfied that the cost of doing something about climate change were both manageable and justified by the benefits in terms of avoided dangerous climate change, it was going to be very difficult to carry this issue in the community.

So I think that's probably why they came to me, someone with an economics background, but really you'll have to ask them.

Matt Smith:

And also not just a strong economics background, but you've worked in the past very closely with Labor.

Ross Garnaut:

I did a lot of work for Labor government of Bob Hawke, in particular on economic reform, and this can be seen as a problem of economic reform with many elements in common with the big issues that were addressed when I was working with Bob Hawke in the '80s.

The reason why Kevin Rudd would have thought of me, this is an international issue. You can't solve climate change in one country. What we do has to make sense in terms of an international effort. The big developing countries, China, Indonesia, India, and other developing countries including our neighbour, Papua New Guinea, are very important in that effort. And my lifetime's work has been on development in the Asia-Pacific developing economies.

Matt Smith:

And as an ambassador as well.

Ross Garnaut:

Yeah, so that would've been the reason why they thought of me.

Matt Smith:

Did you find your perception of climate change changing as you compiled the report? And what were your key findings from it?

Ross Garnaut:

I suppose I began from a position that this was a serious issue, complicated issue, one that wouldn't be very easy to manage. As I read further into the subject, had a lot of interaction with the best scientists in Australia, and to some extent internationally who worked on this issue, I suppose I was confirmed in the view that there were very large costs associated with failure to do anything.

If you like, the subjective probability of serious damage from unmitigated climate change rose in my mind simply as a result of being exposed more closely to the science and to applied science on the impacts in Australia and in Asia, in particular, of unmitigated climate change.

So there was no moment on the road to Damascus. I started from the view that this was an important and serious issue, but my understanding of its importance grew that helped me to the view that the issue was pretty urgent because it was going to take us a long time to implement strong programs and that very large reductions in emissions were going to be required if we were to keep risks of dangerous outcomes down to manageable levels.

Matt Smith:

Your report recommended--is it 90% reduction in carbon emissions by 2050?

Ross Garnaut:

Yes, I said that that would be Australian's proportionate part in a strong global effort. And I defined a strong global effort as the effort that was required to give the world a reasonable chance according to the science of holding temperature increase to 2 degrees Centigrade.

Matt Smith:

Do you think that, economically, this is a realistic aim?

Ross Garnaut:

Oh, yes. It can be done economically. The question is a question of politics, whether the world as a whole can reach an accommodation on reasonable sharing of the burden and on whether the political systems within individual countries can make the big effort that will be required to reach these targets.

But economically it can be done, and it can be done at reasonable cost if the politics holds together. So far, of course, the politics' being pretty difficult in most of the developed countries, although in the big developing countries it's gone rather better than I would have hoped.

Matt Smith:

One of the key recommendations of your report was the emissions trade scheme. Were you disappointed or even surprised when the attempt to put that through didn't succeed?

Ross Garnaut:

I've been around high-level policy-making for a while, and I knew this was a difficult and complex one, so what happened wasn't a total surprise.

But I suppose I'd be kidding myself if I had denied no, that I wasn't disappointed, because I thought there was a lot of community support for action and that if the government at the time had appealed over the heads of the interests who were seeking to block change to the community at large, it would have received very strong support.

Now as it happens, those setbacks through last year, late last year in particular, may turn out to be crucial because the issue is being looked at again in a new political context now.

Matt Smith:

The failure of the ETS at the moment, as it stands, was instrumental in the downfall of both Kevin Rudd and Malcolm Turnbull. Do you feel that you kind of inadvertently had a part to play in that?

Ross Garnaut:

Oh, causation in history is complicated, and undoubtedly the climate change issue played a role. But I think that you'd be drawing a long bow if you do very direct and exclusive lines of causation there.

I think that the more important point is that a strong support for action on climate change continued in the community and there is still is a base for action if governments returned to it.

Matt Smith:

How do you think the Gillard government will approach the climate change problem?

Ross Garnaut:

Well, the main lines of that are already clear within a new parliament where the government doesn't have a majority on its own in either the House of the Representatives or the Senate. There will have to be wide-ranging discussion.

And so it's clear that the first step will be a re-examination of the issues with wide-ranging discussion not only within the government but across a wider spectrum of the parliament. That's the first step.

Matt Smith:

Do you think that there will be effective responses? What do you think of the Citizens' Panel? Do you think it's a positive step or a bit of a stalling tactic?

Ross Garnaut:

I think that the prime minister has made it clear that that's not the first thing she's thinking of in this new political environment.

Matt Smith:

What do you think the next step needs to be, then, if it was up to you, Ross Garnaut, to solve the problem? What do you think needs to be done?

Ross Garnaut:

Oh, I'm very comfortable with the way this new parliament is seeking to address things by looking again, seeking expert advice and being prepared to look at things afresh. I think that's what's required in these new political circumstances and I feel comfortable about what's happening right now.

Matt Smith:

But your report seems to indicate that we don't really have the time to be inactive.

Ross Garnaut:

Oh, yes. We don't have the time to be inactive. Another way of putting that is, the longer we live, the more expensive it will be. So the sooner we can start moving, the better. But the next step, given the history, has to be the sorts of discussions that the prime minister and other political leaders have in mind in the period they head.

Matt Smith:

And how effective do you think a minority government will be in decision-making as far as climate change is concerned?

Ross Garnaut:

Oh, I think there's an opportunity for moving forward. We will just have to wait and see, but all members of the majority that is supporting the government in the House of Representatives and in the Senate are positive about discussing putting a price on carbon. So far, so good, but we'll have to wait and see.

Matt Smith:

Professor Garnaut, thanks for your time today.

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