Climate change is an economic issue, says CEDA

CEDA (the Committee for Economic Development of Australia) has released ‘The Economics of Climate Change’, a report which examines the economic impact of climate change for Australia, explores the responses of other nations and considers what policies will be most effective for Australia to mitigate and adapt to the effects of climate change.

CEDA Chief Executive Professor the Hon Stephen Martin said climate change is both an environmental and an economic issue and that “Australia’s economy will be critically exposed on two significant economic fronts if we do not ensure an appropriate response to climate change”.

“The first area that leaves our economy exposed if we don’t take action relates to the consequences of increasing extreme weather events and the economic and social impact that these events have on Australia’s production capacity,” he said.

“We only have to look at the news in recent years, both at home and abroad, to see the devastation of these events - Cyclone Yasi, Black Saturday, the Queensland Floods, Hurricane Sandy, Hurricane Katrina and the repeated UK floods.

“Where these events have occurred in Australia they have had a direct impact on industry and on the hip pocket of most Australians, from taxes used to fund drought relief packages to the Queensland flood recovery levy implemented in 2011.”

Professor Martin made reference to the town of Roma, Queensland, which has endured several significant floods in recent years. He noted, “If a levee to protect the town had been built in 2005, it would have cost $20 million. However, since 2008 $100 million has been paid out in insurance claims and since 2005 a repair bill of over $500 million has been incurred by the public and private sectors.

“Statistics show that the number of catastrophic weather events is increasing and the economic losses associated with these events are also trending up, which is why we need a national approach to address these risks,” he added.

“What Australia requires is a framework for assessing climate risks and considering possible actions that may lower those risks.”

The second area where Australia stands exposed economically to the effects of climate change relates to the availability of capital to fund its infrastructure and other critical needs.

“Australia is reliant on foreign capital to fund major projects and new developments in international climate change policy are likely to impact international capital flow and investment decision-making,” Professor Martin said.

“Applying climate-related risk assessments when considering investment and financing decisions is an emerging trend globally. This trend is likely to have consequences for nationally significant industries in Australia, such as the resources sector, and associated asset values.

“Australian businesses and governments need to ensure they keep in step with international developments and have the options available to move to less carbon-intensive industries and energy sources if we are to remain globally competitive.

“We must invest in research and development to drive technological breakthroughs and have in place regulatory regimes for all energy sources, including nuclear, so that options can be taken up swiftly as technological breakthroughs occur.”

The report is available here.