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The Risk of Climate Change and its Relation to Energy Futures

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In 2007 the Intergovernmental Panel on Climate Change (IPCC) published its Fourth Assessment Report on the science of climate change. The report showed clearly that the Earth is warming and that there is more than 90% certainty amongst scientists that this warming is due to emissions of greenhouse gases from human activities. Projections of future warming and concomitant changes to the climate system suggest a significant risk to human and natural ecosystems. This is as a result of changes to rainfall patterns, sea-level rise and an increased incidence of various climatic extremes. The magnitude of the risk depends on just how much change occurs, and this in turn depends on the level of global action to decrease the emissions of these gases; in other words, how much we modify the way energy is sourced and used.

In Australia during October 2008, two major documents were released as background material for the development of an emissions trading scheme to be debated in the Federal parliament in 2009 and to be introduced in 2010. The first of these, a comprehensive review of the climate change issue from an Australian perspective, was headed by Professor Ross Garnaut and described climate change as a “diabolical” issue. This term was used to describe a problem which is: uncertain in its format and extent; insidious rather than confrontational; long-term rather than immediate; and international as well as national. Moreover, in the absence of effective mitigation there is a risk of dangerous consequences.

The second document was prepared by the Australian Department of the Treasury and examined the economics of climate change mitigation. It concluded, somewhat controversially, that earlier action will be less expensive than later action. It also argued that Australia and the world can continue to prosper while making emissions cuts and that household incomes in Australia can continue to grow despite increased prices of electricity and gas. The report concluded that coordinated global action reduces cost, and that whilst Australia's comparative advantage (particularly its access to low-priced energy) would change in a low-emissions world, energy-intensive sectors would maintain and improve their international competitiveness. It found that the aggregate economic costs of mitigation are small, although the actual cost will vary across sectors and regions. The allocation of some free permits to emissions-intensive trade-exposed sectors would ease the transition to a lower carbon-intensity economy. Currently however, it is impossible to accurately predict which climate change mitigation strategies will prove the most cost effective.

Document Type: Research Article

Publication date: January 1, 2011

More about this publication?
  • Energy and the Environmental Challenge
    Bringing together eminent Australian, European and Russian experts and practitioners, this volume makes an important contribution to the crucial debates on climate change and energy that will have a profound impact on all our futures. The problems faced by business, scientists, NGOs, policymakers and researchers are multifaceted and complex in nature, so a comprehensive treatment of the subject is best undertaken by a diverse and multi-skilled group. The authors explore different approaches and experiences in securing sustainable energy supplies in Europe and Australia, while heeding the interplay between public policy, science, business and environmental groups. On the threshold of an era of carbon taxing and energy thrift, the views of the authors on the future evolution of our relationship with energy are as insightful as they are thought-provoking.
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