International expert delivers climate policy perspective
Posted : Thursday, April 05, 2012
The renaissance of coal is the most important economic and
environmental problem in the 21st century, an
International climate policy expert visiting Australia to deliver
CEDA's 2012 Sir Douglas Copland Lecture has told event
Potsdam Institute for Climate Impact Research Deputy Director
and Chief Economist and Intergovernmental Panel on Climate Change
(IPCC), Working Group 3, Co-Chair, Professor Ottmar Edenhofer, said
during his speech on Transitioning to a Low Emissions
Future, that the renaissance of coal meant carbon capture and
storage technology is necessary to achieve any meaningful climate
He said coal's abundance, global distribution, low cost as an
energy source and use by countries such as China, India and the US,
meant that it would continue to be used and any global climate
policy must take this into consideration.
Professor Edenhofer also discussed the need for stronger risk
management tools to ensure better climate policy decisions and the
need to examine trade sanctions against climate policy
"When we talk about climate change we have to frame this in a
framework of risk management. Risk management means we have a look
not only at the average outcomes but also the worst case scenarios.
And it seems to me that we, as human beings, are not good at risk
management," he said.
"Assume that you ask the majority of economists in 2003: How
likely is a financial crisis? Most of the economists would respond
the likelihood is below one per cent.
"But if you ask the same economists what would be the impact of
a financial crisis, they would argue the impact of a financial
crisis on our economic systems would be severe.
"So in that sense our conventional risk management tools are not
really adapted to deal with low probability, high impact events and
the climate change issue is one of the cases where we have to
develop such tools if we are to make rational and precise
He said climate policy should be seen as insurance against
catastrophic risk. While he said this would have dramatic economic
implications, the good news is reaching a two degrees target is
still possible at a relatively low cost.
On the issue of reaching a global agreement on climate policy he
said there was no silver bullet and we need a toolbox of
"Most countries would agree that if human kind as a whole can
co-operate on the climate change issue it would be globally
optimum. It would be good if we can avoid dangerous climate change.
It would be beneficial for human kind as a whole," he said.
"However, every single country is better off if only the other
countries mitigate. So there is a strong incentive to behave as a
The problem with this is if all countries behave as free-riders
and there is no global agreement, then it could have catastrophic
consequences for the planet as a whole, he said.
He said policy design needed to disincentivise acting as a
free-rider, suggesting options that should be considered include
linking climate co-operation with research and develop co-operation
and trade sanctions against free-riders.
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