A new report highlights the need for emission pricing as well as technology promotion to combat climate change.  The report, by environmental economists Dr Jack Pezzey and Dr Frank Jotzo at the Australian National University and Professor John Quiggin at the University of Queensland, finds that without emissions trading or a tax to create a significant price on carbon emissions, technology promotion alone will do little to cut emissions.

“Climate policy discussions at APEC must recognise that although cleaner, more energy efficient technologies have great potential to reduce emissions considerably, they will not be used unless there is a sufficient price incentive to make them worthwhile to emitters,” said Dr Pezzey.

“Also, without a carbon price reaching every part of the economy, reducing emissions will cost much more overall, and so be much harder to achieve.  The Australian Government's plans for an Emissions Trading System accept this, and Mr Howard should try to persuade other APEC leaders of the importance of emission pricing.”

The report also highlights the paltry funds so far committed to technology promotion in relation to the size of the task.  The Howard Government's just-announced increase in funding for the Asia-Pacific Partnership for Clean Technology and Development (AP6) from $100m to $150m over 5 years is welcome, but it pales into insignificance alongside the $2000m energy investment needed in Australia alone each year.

“So far it seems that APEC declarations will either ignore the importance of emission pricing altogether,” said Prof Quiggin, “or massively underplay it, as happened in the recent APEC-related report on technology and climate change from the Australian Bureau of Agricultural and Resource Economics.”

“Judging from the leaked draft APEC declaration, a fine-sounding but possibly meaningless target could well be announced for energy intensity rather than for emissions”, said Dr Jotzo.  “APEC's energy intensity (energy per $ of GDP) fell by around 20 per cent over the last 25 years, but total energy use rose by 80 per cent, while emissions rose by 50 per cent.  If energy intensity is targeted to fall by only 1 per cent a year over the next quarter century, economic growth will continue to drive up APEC emissions, unless there is a strong shift toward low carbon energy sources, and that will need emission pricing to be affordable.”