The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

5 June 2008

NO.067

Treasurer Leads Climate Change Discussion at OECD Ministerial Council Meeting

Yesterday I jointly led a discussion on the economics of climate change at the Ministerial Council Meeting (MCM) of the OECD.

Climate change is a profound economic challenge, which requires an economic response, fused by international cooperation.

Like the OECD, the Rudd Government understands that the costs of inaction far outweigh the costs of early and comprehensive action on climate change.

All OECD countries have a responsibility to take decisive action in responding to the challenge of climate change.

At the meeting I stressed the importance of a global solution to climate change and the need for leadership from the world's most developed economies.

I also outlined that an emissions trading scheme will be Australia's primary means of achieving our greenhouse gas emissions reduction goal — to reduce emissions by 60 per cent on 2000 levels by 2050 — at least cost to the economy.

Ratification of the Kyoto Protocol was the first official act of the Rudd Government.

Australia is also actively and constructively engaged in UN negotiations to forge a new post-2012 outcome on climate change that is both economically effective and equitable.

Australia is pleased that one of the world's most respected economic organisations – the OECD – is engaged in extensive research and analysis of possible responses to the challenge of climate change.

I also participated in a discussion of the OECD's latest assessment of global economic conditions.

Today I will be participating in discussions on sovereign wealth funds (SWFs) and the key challenges for growth and prosperity.

5 June 2008

 


 

Intervention

Introduction

I am pleased to be speaking with you today as a representative of a forward looking Australian Government which is taking positive action on many issues, including the crucial issue of climate change.

Ratifying the Kyoto Protocol was the first official act of the Government, and Australia is engaging actively and constructively in the UN negotiations to forge a new post‑2012 outcome on climate change that is equitable, and environmentally and economically effective.

As Treasurer, I know that climate change is fundamentally an economic issue and will have potentially significant economic impacts.

It is encouraging and appropriate that the OECD, one of the world's most respected economic organisations, is also doing some hard thinking and analysis about possible responses to climate change.

Emissions Trading Schemes

At the Finance Ministers meeting in Bali in December I spoke about the important role that market‑based mechanisms must play if reducing greenhouse gas emissions is to be achieved at least economic cost.

This is a theme that I am pleased to see has been taken up by the OECD paper. As it rightly notes, a low cost mitigation policy is a key to success.

Australia has a highly skilled and flexible economy that will support a transition to a low-carbon economy.

Reflecting this, the Government has committed to introducing an emissions trading scheme in 2010 as our primary means of achieving greenhouse reductions.

The emissions trading scheme will place a limit on allowable emissions and the Government will issue permits up to the level of the limit, which will then be actively traded — putting a price on our greenhouse gas emissions.

The scheme will enable us to meet our greenhouse gas emissions reduction goal — to reduce emissions by 60 per cent on 2000 levels by 2050 — at least cost to the economy.

Complementary measures

An effective market based instrument, such as a broad based emissions trading scheme, will reduce the need for prescriptive regulatory based approaches that are also aimed at reducing emissions.

However, there will be some additional measures that can support the scheme, most notably in areas where the carbon price signals provided by the scheme may be muted or subdued.

Australia, has committed to a set of measures to improve energy efficiency and the uptake of low emissions technologies, seeking to overcome the challenges posed by firms and consumers who unable to capture the full benefits of their investments in these technologies.

Just last month the Government announced a $150 million program designed to overcome the fact that property owners typically have little incentive to choose the most energy-efficient appliances for the properties that they rent out tenants. To overcome this split incentive, the government will provide 30 per cent rebates to owners of private sector rental homes towards the cost of installing insulation.

The key policy challenge is to ensure that such complimentary policies support the carbon price signals provided by the scheme.

We know that the costs of inaction far out weigh the costs of action on climate change. As OECD countries, we have a responsibility to take the lead in responding to the climate change challenge.