Facing a new carbon reality

The Western Australian business world was given a stark warning on April 17 about the uncertainties regarding climate change and what a carbon-restrained world means to Australia.

Speaking at Curtin University of Technology’s carbon management forum in Kings Park with sustainability powerbrokers Peter Newman, Doug Aberle and Tony Owen, KPMG partner Rob Hogarth outlined a dark and costly future for WA businesses that have baulked at reducing carbon emissions.

Titled Carbon Management: What are the big issues for the future?, the forum highlighted hurdles with becoming carbon neutral, addressed the regulatory changes to carbon emissions and the difficulties with implementing a carbon pricing scheme.

About 60 dignitaries from the energy industry, various government departments and the planning and construction sectors heard how consumer markets, information, communication and technology (ICT), resources and financial services would be hardest hit by a carbon-restrained world.

Mr Hogarth heads KPMG’s Sustainability and Climate Change Advisory Services, working with companies to reduce their carbon footprints, which increasingly involves carbon risk management.

He discussed KPMG’s Carbon Disclosure Report, which used information provided by the 225 ASX100 and NZ50 listed companies that have partnered “to elevate climate change as a critical shareholder value issue” across Australia and New Zealand.

The report found that 97 per cent of the top 150 companies recognise climate change as an issue, but only 36 per cent were implementing reduction programs for trading options.

“Those sorts of statistics tie up with the sort of evidence we’re preparing for, there’s this lag,” he said.

“We think to date that a lot of the work and understanding within these organisations has been at the environment level.

“A lot of companies have made the decision that they’re going to wait until the uncertainty has cleared. Clients have talked to us about the lack of clarity about the baseline.

“They’re not going to take a lot of abatement action until they know what the baseline is because they might not get any credit for it. Companies have got an enormous amount of uncertainty that they’ve got to deal with.

“Our advice to our clients is: Get used to it. They cannot wait until that uncertainty clears because it will be too late.”

Mr Hogarth advised businesses to implement abatement strategies immediately or face astronomical costs when carbon trading was introduced, likely in 2010.

Studies such as the Stern Review have found that it would cost about one per cent of revenue for companies globally if they acted now to reduce greenhouse gas emissions.

Two abatement instruments investigated by the Federal Government were carbon taxes and the emissions trading scheme.

The government’s climate change expert Professor Ross Garnaut has presented his vision for carbon trading, advising bureaucrats that it would be the most effective without crippling Australia’s economy.

However, the Garnaut climate change review has been condemned by the Mineral Council of Australia, which claims emissions trading would adversely impact Australia’s economy and living standards.

According to Curtin Business School Professor of Energy Economics Tony Owen, in theory both carbon trading and a carbon tax provide identical, inexpensive outcomes for achieving an emissions target, but in practice they may differ significantly.

“You can offer a fixed financial incentive to reduce emissions,” he told the forum.

“But in this case you either fix the level of emissions or you fix the price, you can’t fix them both.”

Professor Owen said his preferred abatement instrument was a carbon tax, which would be transparent and simple, but acknowledged that it would be “difficult to harmonise internationally”.

Western Power managing director Doug Aberle said although carbon trading would almost certainly be introduced, positioning businesses for a future that included emissions reductions would involve thinking in non-traditional ways.

It’s a concept taken on board by KPMG, which has recently calculated its yearly carbon emissions to be 38,000 tonnes.

The financial audit, tax and advisory firm has already implemented abatement measures, including being conservative with paper and becoming more efficient with business travel, such as using video conferencing where it was feasible.

Mr Hogarth said with mounting pressure for companies to disclose carbon footprints over the next 12 months, the true economic impact wouldn’t be felt until carbon trading began.

“We’re certain the emissions trading will be used by 2010,” he said.

“We’re not going to have a whole lot of certainty around the design of that, at best until late this year or early next year.”

Curtin’s deputy vice-chancellor of research and development, Linda Kristjanson, who moderated the forum, said to minimise that level of uncertainty, businesses, universities and the government would have to cooperate.