Whether we’re talking about investing in renewable energy, introducing an emissions trading scheme or putting a price on carbon, the climate change discussion has been invariably focused on the cost to business, consumers and the economy as a whole.
But what about the economic cost of inaction on climate change?
By now, most Australians have are pretty good understanding of the environmental costs of a lack of action on climate change.
We are familiar with warnings by climate scientists that unless we reduce our emissions there will be severe consequences: destructive weather events such as droughts, floods and storms will become more frequent and intense.
These dire predictions about the environmental impact of failing to reduce emissions are alarming. But now we know that continuing inertia in combating climate change will also cost us money.
New data from ClimateWorks Australia highlights that delaying action on climate change carries a hefty price tag – and that the cost will accumulate every year that we don’t reduce emissions.
The research shows that if we wait until 2015 to act on climate change, reaching Australia’s 2020 5% reduction target will cost us an additional $5.5 billion.
This finding is even more sobering when we consider that over the past year emissions have risen in Australia, not dropped.
Figures from the Department of Climate Change and Energy Efficiency released last month indicate that the projected emissions for 2020 have increased from 664 to 690 million tonnes of carbon dioxide equivalent.
In short, Australia now needs to abate more tonnes of carbon dioxide to reach its reduction target.
In the last year we could have saved 5 million tonnes of emissions – the equivalent of taking 1 million cars off the road. But we didn’t.
The largest part of this loss is from missed energy efficiency opportunities in the building and industry sectors – for example replacing old appliances by best-in-class energy saving equipment.
These lost energy savings have the potential to cost Australian households and businesses $5 million per week by 2020 as we struggle to make up lost ground.
And this cycle of lost opportunities and increased future costs compounds with each year of delay. Catching up becomes more and more difficult and more and more expensive.
Some opportunities, such as replacing old cars with more fuel efficient ones or avoiding deforestation, will be entirely lost within the 2020 timeframe.
Even when some catch-up is possible, for example by accelerating tree planting or deploying new technology, it can only be done up to a certain point without significantly increasing costs and risks.
Our work shows that if there is no action before 2015, lost abatement opportunities will reach 85 million tonnes of carbon dioxide equivalent. This is more than the total emissions from the transport sector today.
Although delaying action increases the cost of abatement, the good news is the 5% reduction target is still achievable at relatively low cost.
Almost all (98%) of the this reduction can still be achieved with a $30 per tonne carbon price.
If action is delayed until 2013 this reduces to 84%.
Innovation will be vital in helping us catch up after the delay in meeting our reduction target.
The research by ClimateWorks shows that the environmental imperative for early action to combat climate change is matched by an economic imperative.
Just as we can mitigate the worst environmental costs by acting now to reduce carbon dioxide emissions, we can limit the future economic costs of abatement. It is time to reframe the debate to suit this reality.