Interview with Fran Kelly

ABC Radio National

Tuesday, 31 October 2006

7:40 am

SUBJECTS: Climate Change

KELLY:

Treasurer, good morning.

TREASURER:

Good morning Fran, good to be with you.

KELLY:

As we just heard, Sir Nicholas Stern has said when he endorsed this report, “climate change is the greatest market failure the world has seen.” Do you agree with that Treasurer?

TREASURER:

I think we have seen some pretty bad ones over the years.

KELLY:

So it is not the greatest?

TREASURER:

Well we have seen market failures that have led to wars and famine and global poverty, so we ought to keep all of these things in perspective but it is a challenge, it will be a significant challenge over the course of this century, but it is not on a scale of unprecedented challenges. We will have many challenges to meet over the course of this century.

KELLY:

Well perhaps it is not worth much to try to put a scale on these things but the British Prime Minister Tony Blair had called this report this morning the most important document ever put before his government. How important do you see the Stern report as being?  

TREASURER:

I think the greenhouse issue and global warming is a very important issue and it is something that over a long period of time is going to change climate, let’s put that in perspective.  The UN is saying 0.8 to 2.6 degrees warming over 50 years, and I make those points because there are some people that say, we had a hot day yesterday, this is global warming. You will have a lot of hot and a lot of cold days over the next 50 years.  But what global warming is about is a gradual increase in the average temperature.  Now the consequence of that is that you would expect some movement in sea levels, you would expect some changes to the ability to cultivate land and we have to start preparing for those and the way in which we prepare for them is with sensible measures.  I heard somebody interviewed on your programme yesterday saying the world will end in 50 years, statements like that are not going to help.  The world will be here in 50 years but we will have significant change, about 1 to 2 ½ degrees on average, according to the best science and we have got to start preparing for it now. 

KELLY:

Well the world will indeed be here in 50 years but Sir Nicholas Stern lays out in this 700 page report some pretty dramatic scenarios of what the world will look like if we don’t do anything now. I mean, yes you say we have got a long period of time that climate change is occurring over, but Sir Nicholas says unless we act now, within the next one year or two years to come up with some kind of global agreement, and he particularly talks about a global emissions trading regime, it will be too late we will have dramatic, we will have increases in temperature of at least 2 per cent, but even higher and that could have a dramatic impact on our quality of life. 

TREASURER:

Well I think there are things, that we should be working on all fronts now, on all fronts.  We ought to be working on the front, as we are in Australia, of restricting land clearing. We ought to be working on the front of technology and last week I announced a grant for Australia’s largest solar power station.  We ought to be working to reduce emissions out of coal fired power stations, we have announced some projects in relation to that.  We ought to be encouraging people to take measures personally in relation to solar power with things like rebates on photovoltaic. But the most significant thing internationally which I think we have to do is we have to bring all of the countries into emissions targeting.  There is no point in Australia meeting its emissions target, and we are on track to do so, and I believe we ought to do so, when we are less than 1 per cent of global emissions if you are going to have major emitters such as China and India, which are increasing every year their emissions by more than the total of Australia.  If you were to close down all of Australia’s power stations today, China would more than replace them in one year’s time. 

KELLY:

And that is why Sir Nicholas Stern says whatever response needs to be urgent and it needs to be global.  But he also says part of this whole key to global solution is leadership by industrialised countries because at this point, these countries including Australia are still the heaviest emitters at this point.

TREASURER:

No Australia, we are not even on the map.  In terms of global emissions…

KELLY:

Per capita (inaudible)

TREASURER:

… in terms of global emissions, Fran and this is an important point…

KELLY:

… (inaudible) we are heavy carbon…

TREASURER:

I don’t want to underscore what Australia should do. We are aiming to meet and we should meet our Kyoto targets, let me make that absolutely clear.  But let me also say, if we abolished all power station in Australia today as our contribution to the globe, in a year’s time there would still be more carbon emissions.  You have got to get perspective on this.

KELLY:

Yes I know Treasurer, but in terms of perspective as individuals and as the businesses operating in this country we are still heavy emitters per capita.

TREASURER:

Australia’s contribution to the world carbon emissions is less than one per cent. Now having said that…

KELLY:

Yes and what is our population? Well less than one per cent.

TREASURER:

That’s right.  If Australia today closed all of its power stations, China in a year’s time would have more than replaced them, as would India.  The point I am making here, is we have to play our part, of course we have to play our part.  We should and we are on track to meet our Kyoto targets, let me underscore that again for about the fourth time.  But the biggest issue here is to get countries like China and India and other countries, which have huge impacts on the globe, into these international arrangements. One of the things that Australia does through AP6 of course is to try and bring in these countries, I personally believe if you turned around to China tomorrow and said well you can’t have coal fired power, I don’t think the message would be listened to.  But if you could have a technology breakthrough which cleaned it up, or a technology breakthrough in other areas of energy I think you have got much more of an option of doing something substantial in relation to those emissions. 

KELLY:

And Nicholas Stern also talks about the need for clean carbon technologies to be developed but he says within all of that, key to this, is that people need to be faced with the full social costs of their actions and their aim should be to build a common global carbon price across countries and sectors.  He says that is key, do you accept that?

TREASURER:

Well of course there is a carbon price.  You have to be more sophisticated on this point.  The point is, and I think what Nick Stern is saying, is the carbon price at the moment is not the right price.

KELLY:

It is too cheap, ok, pollution has to be priced.  

TREASURER:

Right.

KELLY:

Appropriately.

TREASURER:

The next point you move to is what measurers should be taken to alter that price?  Now I heard you discussing this yesterday with someone who said that they thought the world would end in 50 years and you asked them about a carbon tax and they said oh no, I don’t support a carbon tax, and I noticed that was the conclusion of others yesterday, so when you get into this question of price you have to be very, very careful as to what you are talking about.  I actually think the most important thing here is to try and increase the efficiency and therefore lower the price of non carbon energy, because that is another big factor in this equation.

KELLY:

But Treasurer everyone agrees, the Prime Minister and Sir Nicholas Stern are in agreement on this fact but still by 2050 about half the world’s energy and half of our country’s energy will be provided by coal, therefore we need cleaner coal technology. How do we get the private industry to invest in that, it will cost millions and millions and possibly billions of dollars to come up with that clean coal technology, unless we have a price on carbon which will then encourage people to invest in this cleaner coal technology? 

TREASURER:

Well you said we are going to need hundreds of millions, we have got $500 million…

KELLY:

But that is a drop in the ocean for what we will need to get clean technology to this level.

TREASURER:

Hang on Fran, I announced last week $75 million for the largest solar generating power plant in the world – not in Australia, in the world.   $75 million is going to build $420 million, so by this stage we have leveraged up, what is that, five times, six times.

KELLY:

With respect Treasurer it is very small numbers when we are talking about $500 billion of what the world…

TREASURER:

The world.

KELLY:

… it will cost us if we don’t do enough now.

TREASURER:

Ok, well Australia is not going to pay for the world Fran.

KELLY:

No (inaudible)

TREASURER:

Hang on, Australia is going to pay for Australia. And we can’t be complacent about this, but there’s $420 million for the largest solar plant in the world, leveraged up from $75 million.  Now we have put aside $500 million which if you can keep leveraging it up at the rates of five or six you are starting to make big impacts.  Now Australia has to play its part. We have to play our part on forestation, on trees, on technology, on solar, in relation to clean coal, we have to play our part. And I completely agree that we need international agreement so that other countries can play their part and the biggest area of international agreement here is going to be bringing the newly emerging industrialised countries into this arrangement.

KELLY:

Treasurer, thank you very much for joining us on breakfast.

TREASURER:

Thanks very much Fran.