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Tackling climate for big returns

By Krystian Seibert - posted Thursday, 19 July 2007

In many ways the climate change debate is a repeat of a debate we had decades ago, the debate about whether Australia goes down the path of free trade or maintains protectionism.

In that debate, the supporters of free trade believed that maintaining protectionism would do more harm than good to the Australian economy in the long term, so they argued for tariff reductions and other measures necessary to open up Australia's economy to the world.

Undoubtedly some of these measures caused adjustment difficulties for Australia's economy in the short term but in the long term they delivered considerable economic benefits, the increased trade that resulted from opening up Australia's economy to the world has been one of the main reasons we are now such a prosperous society.


One argument supporters of free trade proposed to justify the factory closures in certain industries and other short-term impacts of free trade was that the process of opening up an economy to realise the benefits of free trade required significant structural change in our economy.

Now how does this relate to the climate change debate?

Well, while the movement towards free trade involved recognising that an economy built on protectionism was unsustainable, the shift towards addressing climate change involves recognising that an economy built on free carbon is unsustainable. And as the move towards free trade involved significant structural change, the shift towards a carbon-constrained economy will also involve such structural change.

In many ways the changes required to address climate change will be similar to those in the move towards free trade. This involved investment and jobs moving away from internationally uncompetitive industries, dependent on tariffs and government subsidies in order to compete with imports, towards internationally competitive industries.

In addressing climate change, once we accept the bold emissions-reduction targets that are required to reduce the effects of climate change, and the introduction of an emissions trading scheme puts a price on carbon emissions to achieve these targets, the structural change which will follow is likely to involve a shift in investment and jobs towards lower-emitting industries.

But just like the transition to an economy based on free trade involved accepting short-term adjustment difficulties in return for long-term economic benefits, the transition to an economy based on constrained carbon emissions will also provide long-term benefits, even if there are some short- term adjustment difficulties.


While, in the case of free trade, these benefits were mainly in the form of lower prices for Australian consumers and new jobs in internationally-competitive industries, in the case of climate change the long-term benefits will be the avoidance of environmental problems and the associated economic effects that would be a consequence of climate change.

The Stern Report in Britain estimated these costs and showed that the costs of not acting far outweigh the impost of acting. The Garnaut Review is in the process of quantifying such costs in an Australian context.

Of course, just like opponents of free trade tried to shape that debate in terms of being a choice between jobs and free trade, the opponents of climate-change action will try to shape this debate in the same way. But in the long term these choices will prove to be false.

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First published in The Canberra Times on July 17, 2007.

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About the Author

Krystian Seibert is a public policy professional based in Melbourne. He has worked as a policy adviser to two Australian Ministers and studied regulatory policy at the London School of Economics.

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