Eureka: Climate Lessons from Down Under

Australia was a stalwart Bush ally on climate change inaction until Kevin Rudd was elected Prime Minister last November. His first official act was to ratify the Kyoto Protocol, which he did with much fanfare at the Bali climate meetings. And he unveiled a grand plan to unite the world on climate change.

Rudd provides an illuminating example of what can happen in almost no time when a head of state gets behind climate action -- as well as a painful reminder of the price exacted by a leader committed to federal inaction on climate.

In his few months in office, climate action in Australia has moved at a very fast pace. The nation set a 20% renewable energy target by 2020, and committed to 60% reduction of greenhouse gases by 2050. It's also joining in the production of the Garnaut report -- which will advise on comprehensive climate change policies, including a carbon trading scheme. It's slated to be done in September and to set the stage for adoption of national climate law.

The US -- the world's #1 cumulative greenhouse gas emitter -- remains isolated as the only major economy to be a Kyoto holdout. A bill passed by the House to extend production tax credits to renewable energy industries is expected to die in the Senate or on the President's desk. (Let's not even talk about a renewable portfolio standard.) And the lead climate bill slated for Congressional discussion -- Lieberman-Warner -- currently provides enormous windfall giveaways to coal-burning utilities and other major polluters.

Interim findings of the Garnaut Report were issued in Australia last month. It said in no uncertain terms that electric utilities cannot expect to receive a free ride. The logic and fairness is unassailable.

Firms with less dependence on emission intensive production processes, or which have the ability to switch production process quickly in order to minimize their exposure to a carbon price, may find their market share (and even their profitability) increases.

Firms which have less flexible capital structures could be faced with having to choose between passing on the price (and losing market share) or absorbing the price of emissions at the expense of profitability. All things being equal, such firms may face some loss of market value.....

.....the business community has been aware of the risks of carbon pricing for many years, and many businesses have sought to re-engineer their production processes to reduce their reliance on direct and indirect emissions in anticipation of such changes.

With no Kevin Rudd equivalent leading the government in the US, the Lieberman-Warner bill gives polluters a free ride. So you wonder, what's the rush to get the bill to the Senate floor in June and secure passage, with Bush still in office?

You'd think it would color all the deals being cut in Congress the color of oil and coal, and give them a radioactive glow as well.

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