Business gains from reduced CO2

It's been a moderately bad week for the federal government's environment credentials. Prime Minister Kevin Rudd announced that the government's Emissions Trading Scheme (ETS) would be delayed a year and the target would be to reduce CO2 emissions by merely five per cent -- and specifically five per cent based on year 2000 levels -- a move that calls into question the commitment to real reduction.

Predictably, perhaps, the Greens were concerned by what they charge is a broken election promise. The government's climate change minister, Penny Wong, fired back that the new goal posts still represented "a significant reduction" and confirmed that the government's Carbon Pollution Reduction Scheme (CPRS) would go ahead as planned, next year. It was just another typical week in politics.

Last week, the Carsales Network happened to be in conversation with Simon O'Connor, Economic Adviser to the Australian Conservation Foundation. O'Connor was dismissive of a report from Monash University about 12 months ago (more here), that carbon reduction targets for Australia could not be achieved with the current or foreseeable technological and logistical resources.

In response, O'Connor cited a report that indicates both the government and the boffins at Monash are being overly pessimistic and 'conservative' -- but not in an environmentally-friendly way.

"We fundamentally disagree that [carbon reduction targets are] unattainable," O'Connor said.

"There's a lot of reports out there. One of the best is probably this report by McKinsey & Co -- a global management consultancy firm -- that identifies 30 per cent of Australia's emissions reductions are no nett cost.

"That is they are just energy efficiency savings with existing technology. So it's just about being smarter with the energy we use -- it's not even about changing energy suppliers."

O'Connor, describing this 30 per cent reduction as "lowest-hanging fruit", gave examples from building facilities management -- and praised Lend Lease Corporation for advanced work being done in the areas of pump management, climate control and other aspects of building operations.

Carbon reduction measures in property management can be carried across into the narrower field of vehicle manufacturing, says O'Connor. He draws a parallel between car companies looking for increased labour productivity to reduce cost and ways of reducing power consumption -- which will also reduce cost to the manufacturer. Better still, it should be possible to reduce power cost and CO2 emission, if the manufacturer can migrate to viable, cleaner energy.

"When you look at competition between car manufacturers for example, the smart ones aren't out there lobbying right now, the smart ones are investing in energy efficiency -- and they'll be much more cost-competitive to the other manufacturers. It's a real point of competitive advantage for those that are the first movers out there."

The prime minister has used the Global Financial Crisis as a logical basis for delaying the ETS, but O'Connor believes that much can be done -- rapidly and cost-effectively -- during economically adverse times, to reduce carbon emissions.

"There's a very strong case to be made for tying together the work we're doing to fight the recession at the moment, to be actually also mitigating climate change impacts," he says.

"In one sense you can say it's an additional cost to business, but in another sense, it's not much different to what we've been aiming for in terms of increasing labour productivity for years.

"We're really just talking of improving our energy productivity now. And the CPRS is the perfect mechanism to drive that. All that's going to do is bring us out of a recession with a much more strongly export-competitive industrial sector, which has massive benefits... [It's] the reason we've been pushing for labour productivity for so many years. We could just be doing the same thing for energy now."

If, based on the "lowest-hanging fruit" scenario, O'Connor is upbeat about the prospects of reducing carbon emissions rapidly, he remains unimpressed by what seems like the federal government's back-sliding on such issues as the fuel tax rate reduction (more here).

It's not a major point of contention -- and the ACF has responded with its own submission to Treasury pointing out the conflict anyway -- but to O'Connor it's indicative of a government compromised by other considerations. The fuel tax rate reduction is at odds with the government's Green Car Innovation Fund, for example.

"It's important... to set this type of policy in the context of what the government's trying to do with some of its other actions and spending commitments at the moment," says O'Connor.

"The Green Car Fund -- billions of dollars directed to improving Australia's manufacturing capabilities towards more green vehicles; and yet at the other time we're actually softening up policies that should be complementary to that. We should be aligning all our policies to be driving in the same direction.

"So softening the impetus for Australian drivers to be moving towards greener cars at a time when we're increasing the investment in automotive manufacturing to build green cars, you'd think they should be better aligned than they currently are."

It might be argued that the fuel tax rate reduction is the thin end of the wedge, lessening the viability of small cars planned for production by Ford and Holden, as well as Toyota's Camry Hybrid.

O'Connor acknowledges the continuing need for the motor car in major cities like Sydney and Melbourne, spread over an enormous area and often serviced by inadequate public transport.

"Most Australians out there are still heavily dependent on the car -- and there's a very good reason... Our public transport system is still pretty... crap, to be blunt. Our cities are designed for cars.

"Really, for most of us living out in the suburbs, it's pretty difficult to rely on the very infrequent bus or tram that comes by. There's a hell of a lot to do to really transform those patterns of transport use.

"We need to be much smarter about when we use cars and -- really -- let's save some congestion off our roads..."

A key plank in reducing congestion on the roads -- and greenhouse gases with it -- is to make major improvements to public transport infrastructure; something the Victorian government has just announced in its state budget. O'Connor believes that the federal government needs to find a way of channelling money to the states and the private bodies running public transport systems for that improved infrastructure to happen.

"One of the conclusions we drew in our submission here [to Treasury] is... it's no use funnelling more money into compensating drivers for this [fuel excise] adjustment under the CPRS when in fact we need to be much more explicit about what we're trying to do -- if we're really serious about helping with the adjustment towards a low-carbon future.

"And that money needs to be redirected straight away towards public transport infrastructure and a massive expansion of that."

-- with AAP

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