Peter Garrett MP

25 July 2007

Thank you very much for the opportunity to speak to you today.

I would like to congratulate Citi Investment Research – Justine Brant and Elaine Prior, in particular – for organising this inaugural Climate Change conference.

I’ve spent many years working on environment issues, including this one, but there’s no doubt that climate change is front and centre the key moral, environmental and economic challenge of our age.

Prime Minister Gordon Brown, referring last night to climate change in the context of the extreme weather the UK is currently experiencing is, I anticipate, a taste of things to come. As leading climate scientist Jim Hansen has remarked, with global warming in train, we are indeed living on a different planet.

I want to acknowledge the important role that the financial sector is already playing in delivering climate change solutions.

Just look at Citigroup, the world’s biggest financial services company, committing I understand, some $60 billion to address the risk and rewards of climate change. And over the next 10 years, about $31 billion will go to fund wind farms, biofuels, solar power and other projects.

This is real, much needed climate change investment and likely to grow. I note the UK’s Sunday Times report on 15 May, 2007, that venture capital and private equity investment in clean energy companies soared 138% last year to $5.3 billion.

 Of course, the prospects are great. Bloomberg Markets put it like this; venture capitalists “who can find a Google or Amazon or EBay of green power will make a fortune”.

That investment and the search for that return is very welcome, because we urgently need a clean energy revolution if we are to meet the climate change challenge.

That challenge was recognised by one of the world’s leading investment banks, Lehman Brothers, in these words, and I quote:


Catholic Super chief investment officer, Tim Hughes, made a similar point to a climate change forum on 24 May 2007, when he said climate change was the “biggest long-term risk we face”.

In their important report “The Business of Climate Change: Challenges and Opportunities”, which was released in January 2007, Lehman Brothers went on to say:


That is the critical message, one that is increasingly echoed in the financial media, from business leaders, and shareholders too. Namely that whilst climate change poses a raft of serious challenges, it also presents substantial business opportunities.

As Ian Woods of AMP has said, “institutional investors have a unique view on climate change as we are exposed to all aspects of climate change”, and investors will need amongst other things, a functioning market to operate in.

The opening of the Australian Climate Exchange is an important milestone along the path to enabling greater carbon based transactions, including at some time, a fully functioning emissions trading scheme.

I know the international mandated markets traded about $US30 billion of credits last year, the voluntary markets about $US100 million.

In the US, the Chicago Climate Exchange's trading volumes in the first six months of this year were, at 11.85 million tonnes of carbon, bigger than for all of 2006, when 10.3 million tonnes were traded.

I think these figures demonstrate that we are at the threshold of the carbon trading journey, and are starting to see the economic opportunities that will arise from tackling climate change head on.  And there is no doubt that we must tackle it head on.

I understand that Kevin Hennessy of the CSIRO has just given you a presentation on the latest science, so I won’t attempt to cover that ground again, except to make this point, so eloquently rendered with the image of a man standing on the edge of an ice flow, diving into the Arctic Ocean.

Unless we act now to significantly reduce greenhouse emissions, we could see a 3 degree rise in temperature by 2100, and that would clearly be catastrophic for our environment and our tourism and our agricultural industries.

We say climate change represents a real-time national environmental emergency – with massive economic ramifications.  

The IPCC estimates, and Kevin may have referred to it, that global emissions will need to peak in the next 15 years and fall to 50 per cent below 2000 levels by 2050 if we are to avoid dangerous climate change.

And as was identified in the discussions prior to the Kyoto protocol, developed countries need to take the lead in cutting emissions. That means that reductions in developed countries will need to be higher than for those in the developing world.

So that is why the Labor Party is committed to cutting Australia’s greenhouse pollution by 60% by 2050, a target based on science.

Modelling which you would be aware of, undertaken by the Australian Business Roundtable on Climate Change, which includes leading companies Westpac, IAG, Visy, Swiss Re and Origin Energy, has concluded that Australia can cut its emissions by 60% by 2050 and maintain strong economic growth, and other modelling reinforces this view. You would have heard that from Sir Nicholas Stern on his visit to Australia earlier this year.

In fact, it is becoming clear that not acting carries extraordinary economic risks, while acting early carries great economic potential.

In terms of the implications of not addressing climate change and the impact that climate change will have on Australia, let me isolate two very quick examples.

CSIRO estimates that a 20% reduction in Australian irrigation allocations would deliver a reduction in GDP of about $750 million in 2009/2010, I think they are moderated figures

Or the other obvious example that’s quite often put, relates to one of our great national and international treasures, the Great Barrier Reef. Substantial employment, some 200,000 people, are directly dependent on a healthy Great Barrier Reef, which generates around $4 billion for our economy.

The economics of climate change are such that it is in the interests of business – small, medium and large – in rural and regional Australia and in cities and towns across Australia – to engage in real, comprehensive action to address climate change, which is what businesses are doing, and people too - and that is what we are seeing right across the country.

But regrettably, Australia continues to miss out on opportunities because of the Howard Government’s refusal to ratify Kyoto and the absence of incentives for investment in clean energy.
 
Andrew Richards of Pacific Hydro made this abundantly clear when he said on 5 June:


Yet the government is now saying specifically it will not enlarge support for renewable energy targets, and those examples of businesses and industries that have gone offshore to the clean energy path will continue to bedevil us.

The recent up-swelling of awareness in the Australian community, brought on by things like Al Gore’s film, like Sir Nicholas Stern’s report and by a lot of media reporting about climate change, and an up-swelling which has included Australia’s business community, has cemented I think, the realisation, that climate change is an enormous economic and environmental challenge and that we need policies to address the challenge  

As a consequence, the Federal Government is now giving the impression that it is concerned about climate change, but there are lingering doubts, it seems.

On Monday, John Laws asked the Deputy Prime Minister, Mark Vaile, how global warming rated as an issue of concern to people, and  Mr Vaile said:


That is an extraordinary statement from such a senior member of the Howard Government. We cannot get climate change solutions from a government full of climate change sceptics, or in this case, deniers.

The question we ask is: when will the government unreservedly accept that climate change is real, that it’s happening now and that we need to build a national consensus on how we are going to tackle this national challenge? This is what Labor leader Kevin Rudd called for when he inaugurated the National Climate Change summit in Canberra earlier this year. The answer to the question, at least from our perspective is: “Not in the life of this Parliament”.

There is no doubt climate change brings challenges, but seriously tackling climate change also brings economic opportunities.

In some parts of the world, investors are talking about ‘the next industrial revolution’. A key economic question for Australia is whether we will embrace this low-carbon economy, and in fact, whether we will drive it.

There is also no doubt that the global market in clean technology continues to grow apace. UN reports show that it grew some 43 per cent last year, and was valued at $71 billion. Projections suggest that the wind, solar, biofuels and hydrogen markets alone will grow to $226 billion by 2016.

And the fastest growing energy technology in the world is grid-connected solar photovoltaic, which grew by 60% between 2000 and 2004, coming off a low base, I agree, but substantial growth nevertheless.

You may be aware of a recent study by the University of California at Berkeley that concluded: “the renewable energy sector generates more jobs per megawatt of power installed, per unit of energy produced, and per dollar of investment, than the fossil fuel-based energy sector.” That is a strong message for us to consider in the long term.

We believe that Australia has the potential to be a regional hub for clean energy – our solar scientists are amongst the best in the world – but that will require genuine investment domestically in clean energy and a suite of policies – including greenhouse emissions targets - that enable this growth.

Surely business is part of the climate change solution, that is certainly part of our thinking, but I think climate change solutions are more than just a way of seeking business opportunities.

It is about recognising that climate change will impact across many aspects of our activities and our endeavours; that it has a profound social impact on communities, on cultures, on environments.

I was particularly pleased to see The United Nations Principles for Responsible Investment, which were introduced in April 2006, as the swansong of UN Secretary General Kofi Annan. And that today over 200 signatories representing over US $9 trillion have endorsed the six principles, and that they provide institutional investors with a framework to incorporate environmental, social and governance issues into investment processes with the aim of ensuring that the investment industry better aligns them with social objectives, and that ultimately, they will merge.

In Australia a number of institutions have embraced the Principles. I understand that Australian Super, Cbus, Hesta, ARIA and UniSuper, among others, have endorsed them.

Australian finance sector leaders – and the superannuation industry (who I spoke to yesterday), in particular – are showing the way in corporate responsibility, and that is gratefully acknowledged.

I have been impressed by Westpac’s leadership role in the Australian Business Roundtable on Climate Change.

We were delighted when NAB announced that it was going carbon neutral by 2010.

We welcome VicSuper’s ongoing engagement on climate change issues. I think VicSuper was absolutely right when it said:

“managing climate change risk is part of our fiduciary responsibility, and such risk should be taken into account in our investment and operational decisions at the trustee level.”

My sense is that the Australian business community is gearing up for the economic opportunities that will come from embracing a low carbon economy, to recognise the dimensions to their activities and that they just need the government to stop holding them back.

I’m here to tell you that Labor is ready to embrace the opportunities of a clean technology future in partnership with Australian business.

That’s why we’ve announced a comprehensive action agenda to tackle climate change – an agenda that provides business with the certainty to manage risk, and crucially, gains a foothold in markets where businesses in the rest of the world are already operating.

Labor will implement an emissions trading scheme in 2010 to provide the right market signals for industry and ensure our trade exposed sectors are not disadvantaged.  

We will develop an emission trading market that rewards energy efficient industries and efforts to reduce greenhouse gas emissions.

We’ve identified five key tests that a national emissions trading scheme ought to meet.

It should be cap and trade and internationally consistent. Labor will ratify the Kyoto protocol; it will be one of the first actions of a Rudd Labor Government, should Labor come to power. We will seek to maximise the opportunities for Australian industry to participate in international carbon markets, through trading emissions allowances and creating or using offset credits.

The second feature is that it will effectively reduce emissions.  

Third, it will be economically responsible.  In taking the lead ahead of some countries, it is vitally important that a scheme does not undermine Australia’s competitiveness.  It’s also important that is complemented by other measures to build a strong clean energy industry.

Any scheme should be fair, ensuring the most disadvantaged are not worse off.

And, the scheme should start as soon as is prudently possible.

We need specific mechanisms as a core part of the scheme that ensure that Australian operations of energy-intensive trade-exposed firms are not disadvantaged before an effective international agreement is in place.

I was particularly disappointed with the Government’s response to the Task Group report that it had initiated, because still, we have no long term target, and we have no sense that the government comprehends the scale of the climate change challenge.

Of course it was the case that less than a year ago Mr Howard was saying that an Australian Emissions Trading Scheme will result in “great damage” to the country. Regrettably the Coalition’s approach is more about playing catch up, and less about seriously addressing climate change.

In addition to those principles that I identified, Labor will build a new clean energy economy, and will substantially increase the Mandatory Renewable Energy Target.

We want to work closely in partnership with business. Labor will invest in innovation and research in clean technologies, build new market opportunities and drive energy efficiency improvements across the economy.

And we will help families by offering solar panel rebates and up to $ 10,000 low interest loans for practical action to improve household water and energy efficiency.

And yesterday, along with Bob McMullan, the Shadow Minister for International Development Assistance, I was pleased to announce that a Rudd Labor Government will commit $ 150 million from Australia’s international aid budget to assist our neighbours prepare for and adapt to the effects of climate change. I think it’s been, frankly, a national disgrace that Australia has ignored the pleas of the nations of the South Pacific, the low lying island states of Kiribati and Tuvalu in particular, by preventing the inclusion of climate change on the agenda at the South Pacific Forum.

Above all, we want to work with business to tackle this great environmental and economic challenge of climate change, and we will exercise national responsibility and put in place a policy framework which ensures Australia has both a sustainable environment and a sustainable economy - nothing less will suffice in the age of climate change.

Thank you for the opportunity to speak to you today.