Climate change debate hots up

One of the most important aspects of a chief executive’s work is to look beyond day-to-day matters and focus on big, strategic issues; the kind of issues that will profoundly change the commercial landscape in future decades.

The rise of the BRIC economies is one such issue. Brazil, Russia, India and China all hold potential to change the balance of global economic power.

Another issue is Australia’s ability to take advantage of growing demand for mineral and energy commodities.

Despite the resources boom that we all hear about – and witness first-hand here in WA – Australia’s share of production of most commodities has stagnated or declined over the past decade.

These were some of the points that BHP Billiton chief executive Marius Kloppers made in a Sydney speech last week.

As head of the world’s largest diversified resources company, with operations in more than 25 countries, Mr Kloppers has good reason to focus on the big international issues.

However Australia is BHP’s home and the main focus of his speech was the politically fraught issue of climate change.

His comments illustrate the wide divide within Australia’s business community on this issue.

That divide is also reflected in the Liberal Party. Let’s not forget that Malcolm Turnbull, who backed former prime minister Kevin Rudd’s plans for an emissions trading scheme, lost the party leadership to Tony Abbott by just one vote.

Mr Kloppers does not support an ETS, but he has declared support for another policy tool to achieve similar goals – a carbon tax.

It’s worth recapping some of his introductory comments.

He said that BHP “acknowledges that the mainstream science is correct, and that we need to stabilise and eventually reduce the carbon concentration in the atmosphere”.

Historically BHP has supported international action, with binding commitments by all developed and major developing economies to reduce greenhouse gas emissions.

Having watched the failure of international events, such as last year’s Copenhagen summit, BHP has changed tack.

“We believe local actions that are eventually harmonised into unified global action is a more likely outcome than an immediate broadly supported global initiative,” Mr Kloppers said.

“We also believe that such a global initiative will eventually come, and when it does Australia will need to have acted ahead of it to maintain its competitiveness.”

Mr Abbott and many other global political leaders will beg to differ with Mr Kloppers’ conclusion.

Even prime minister Julia Gillard may be a little uncomfortable with his advocacy, since she worked hard during the election to sideline the issue of climate change by saying the government would not act until there was clear community support.

That could change as a result of Labor’s reliance on the Greens to stay in power and get legislation through the Senate.

Mr Kloppers told his audience that Australia has a high carbon economy.

We are the eighth largest emitter of carbon, and the largest on a per capita basis in the ‘Kyoto Annex 1’ countries.

“To remain competitive in a future carbon-constrained world, Australia will need turn into a lower carbon economy,” he said.

A few key statistics helped to focus the discussion.

Just over half of Australia’s emissions come from the energy generation sector, followed by agriculture (16 per cent) and transport (14 per cent).

In 2007, there were only five countries with a more emissions-intensive energy supply, and they make an extraordinary list: Bosnia Herzegovina, North Korea, Estonia, Mongolia and Poland. It’s not often Australia gets included in that company.

The reason is simple; Australia generates most of its electricity from brown coal, and despite lots of talk, more investment is going into that sector.

That is unlikely to change until there is a price put on carbon emissions; in Mr Kloppers view, via a combination of a carbon tax, land use actions and a limited emissions trading system.

His speech also included a call for policies that will not damage BHP or other companies in trade exposed industries, such as applying rebates until a global system is in place.

Mr Kloppers’ views have already been derided, but they provide a constructive contribution to the long-running debate.