The Myth of Economy Versus Environment


Picture a box 120 metres high covering an area the size of Australia. Now fill it full of greenhouse gases. That’s how much climate-warming gases humans have spewed into our paper-thin atmosphere since the fossil-fuel-based industrial revolution. That pure high-rise of carbon dioxide (CO2) is now growing by 3 metres each year, and it will double the atmosphere’s concentration by the middle part of this century. On current projections, that CO2 high-rise will be over 800 metres high by the end of this century.

Earth’s climate has been observed to have warmed by about 0.8°C in the past century. The signs range from an acceleration in Arctic sea-ice and glacier melting to sea-level rise and ocean warming. Changes in the sun’s intensity, orbital wobbles of Earth’s path around the sun or volcanic activity are all important natural factors that could contribute to the recent warming on Earth. However, if left to those natural factors alone, Earth would have likely cooled over the past 50 years based on the observations of the sun’s activity and volcanism. This means that climate scientists are 90 per cent confident that global warming over the past 50 years has been caused by human-induced increases in atmospheric greenhouse gases. Continually pumping tens of billions of tonnes of CO2 into Earth’s thin atmosphere has altered (and will continue to alter) the fabric of Earth’s climate.

Scientific projections can never be 100 per cent certain. The nature of science involves managing a level of uncertainty. But is the small level of uncertainty a reasonable case for inaction on climate change? A friend’s grandmother smoked two packets of cigarettes a day since she was 20 years old and lived until she was 90. Does that mean the scientific link between smoking and cancer is wrong? Of course not, since there are other natural genetic factors that can lower the risk of lung cancer.

For global warming there may indeed be some natural factors that could partially offset the well-known evidence demonstrating greenhouse gases warm the planet. There is a very small chance these factors may play out. Yet from the weight of scientific evidence and observation, we are currently smoking two packets a day, seeing the first signs of cancer, and hoping that the future planet will be healthy. It doesn’t really seem like a wise bet to make.

Given that climate change projections are informed by hard science, I thought the case for a pre-emptive strike on carbon emissions was pretty clear. How wrong I was. In 2007, I was in Canberra as a young scientist pushing the scientific case for action and learning very quickly that the government was completely blind to the gravity of potential threats to Australia beyond just the environment. At a high-level meeting in the Cabinet room, as I looked in awe around me, all I could see was a sea of grey hair and suits clustered around the biggest table I had ever seen.

Sitting to my right was the prime minster, John Howard, the minister for education and science, Julie Bishop, the environment minister, Malcolm Turnbull, and the minister for industry, Ian Macfarlane. Scattered among the rest of the Cabinet were the heads of every science, research, technology and education body in Australia. Before my presentation, three of Australia’s most influential climate scientists presented an exhaustive report of recommendations on how Australia could actively respond to the emerging climate of change. As I stared down the Cabinet room I wondered why the two most senior government ministers responsible for the economy and foreign policy were not in the room. Where were the treasurer and the foreign minister? It seems for many years the Australian government reflected a broad and dangerous public misconception about combating climate change: that is it has nothing to do with Australia’s long-term economic prosperity or national security.

There’s an age-old myth that doing good for the environment is bad for the economy. The twin goals of cutting pollution and growing the economy are dominated by this zero-sum game, in which environmental gain must take away from the economy. In Australian cities in the decade between 1991 and 2001, average levels of non-greenhouse pollution from cars, including carbon monoxide, nitrogen dioxide and sulphur dioxide, were reduced by up to 50 per cent. This cut in pollution occurred despite one-quarter more cars being on the road and Australians driving 30 billion more kilometres each year. Meanwhile, the Australian economy expanded over 40 per cent. There are many such examples of net economic benefits as a result of cleaning up the environment.

Do you remember the debate about the ozone layer? Ozone scientists in the 1980s focused world attention on the issue by measuring a widening hole in the ozone layer. Through more diagnostic research it was found that ozone depleting chlorofluorocarbons (CFCs) used as refrigerant were the cause. In 1987, the United Nations put forward the Montreal Protocol (that was ratified by nearly all nations), which phased out the use of CFCs in order to repair the damage to the ozone layer. Prior to the Montreal Protocol, no replacement was considered possible for CFCs and the processes like refrigeration and air-conditioning in which they were used. Some politicians, commentators and industry groups predicted massive job losses and economic damage because of the Montreal Protocol, claims that continued after ratification. Somehow, they believed, phasing out CFCs would cause massive economic damage.

So what actually eventuated when the world embraced the Montreal Protocol and banned CFC production? The chemical industry quickly found an alternative compound to CFCs for use in refrigerators and air-conditioners that caused much less damage to the ozone layer. It’s been estimated that by the year 2060, the CFC ban will result in 1.5 million fewer melanomas, 19 million fewer non-melanoma skin cancers and 130 million fewer cataracts. Many of those lives saved from skin cancer will be Australian.

Avoided ultraviolet radiation damage to agriculture, fisheries and materials is estimated to amount to US$460 billion. The direct cost of phasing out CFCs was US$235 billion between 1987 and 2006. So if you count just the financial costs of implementing the Montreal Protocol, it sounds like a lot. But even not allowing for the massive health and productivity benefits, there was a net $US230 billion saving to the global economy by introducing the Protocol. The cost of inaction exceeded the cost of action.

Since 2001, the new breed of Australian conservative leaders has sung the age-old myth that reducing greenhouse gas emissions will "wreck" the economy or have a "devastating impact" on it. But what is the counter-factual to this assertion? That is: what’s the economic impact of allowing dangerous climate change?

Nicholas Stern, a former World Bank chief economist, warned of the massive economic risk of failing to combat climate change in his 2006 report to the British Parliament. Stern concluded that failing to limit climate change could cost the world economy between 5 and 20 per cent of gross global income this century — a figure equivalent to the combined effect of the past two world wars and the Great Depression.

A similar question only just starting to be discussed in Australia is: what are the economic consequences for Australia if we don’t slow climate change? How important to us is it for Kakadu and the Great Barrier Reef to exist in 50 years time? What are the economic implications of running the Murray-Darling basin completely dry and fitting every city with billion-dollar desalination plants? What are the climate impacts for our agriculture and exports?

The answers to some of these questions can be estimated through economic models. For example, the Australian Bureau of Agricultural and Resource Economics (ABARE) has modeled the potential impact on Australian agriculture from temperature rises, rainfall changes and weather extremes associated with climate change. ABARE found that, in terms of agricultural production, Australia will be one of the worst affected regions by climate change. Australian wheat, beef, dairy and sugar production could decline by up to 20 per cent by mid-century. It also estimated that Australian agricultural exports could plummet by up to 80 per cent.

The CSIRO predicts rapidly declining snowfall in the Alpine region, while the risk to the Great Barrier Reef through warming-induced coral bleaching and/or ocean acidification is very real. Along with a sea-level rise eating away Kakadu National Park, there is a great economic risk to the $22 billion a year Australian tourism market so dependent on these national treasures.

Professor Ross Garnaut, the well-respected Australian economist, estimates that climate change could cost the Australian economy up to 5 per cent of GDP this century, with an associated cut in real wages of up to 8 per cent. The Garnaut Climate Change Review, commissioned by the Labor Government, has finally broadened the scope of climate change and energy policy to be at the heart of Australia’s long-term economic prosperity — where it should be. Other nations have long understood the importance of
environmental sustainability for economic prosperity. In 2005, the situation was captured eloquently in a speech by Gordon Brown, back when he was Britain’s chancellor of the exchequer:

"Environmental issues — including climate change — have traditionally been placed in a category separate from the economy and from economic policy. But this is no longer tenable. Across a range of environmental issues — from soil erosion to the depletion of marine stocks, from water scarcity to air pollution — it is clear now not just that economic activity is their cause, but that these problems in themselves threaten future economic activity and growth."

There is a strong moral and intergenerational imperative to combat climate change. But even the driest of economic conservatives can’t ignore the economic risks associated with climate change. After my Canberra experience I realised that compelling scientific, environmental or moral arguments aren’t strong enough to force the change needed to solve this problem. Without an economic awakening, the changes needed to cushion the blow to Australia’s future prosperity will never be realised.

This is an edited extract from The Clean Industrial Revolution: Growing Australian Prosperity in a Greenhouse Age by Ben McNeil (Allen & Unwin: 2009).

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