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Carbon cuts in growing economies

18 February 2013

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Paul Burke is a Fellow in the Arndt-Corden Department of Economics. His research interests include economic growth and development, energy economics, environmental and natural resource economics, Asia-Pacific economies and empirical political economy. He teaches Microeconomic Analysis and Policy (IDEC8016) and Environmental Economics (IDEC 8053) at Crawford School.

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Moving to low-carbon electricity generation has been the key route to achieving the largest emission reductions internationally, according to new research.

Dr Paul Burke of the Arndt-Corden Department of Economics studied the emissions from energy of 105 countries over the last 40 years to identify how the countries that have achieved the largest emissions reductions have gone about it. The results of his work were published in a recent issue of The Australian Journal of Agricultural and Resource Economics.

Burke found that a growing economy does not have to mean growing emissions.

“The historical experience suggests that large emissions reductions can be achieved even as economies continue to expand,” he said.

“Sweden, for instance, has reduced its carbon dioxide emissions from energy by around 50 per cent since 1970, even as its economy has more than doubled in size. The reductions were primarily enabled by Sweden’s transition to nuclear energy, which powered 39 per cent of the country’s electricity in 2011. Sweden’s nuclear switch was not aimed at addressing climate change, but stands as a leading example of how large emissions reductions can be achieved.”

But a country doesn’t need to make a switch to nuclear power in order to achieve emissions reductions. Other countries have achieved reductions via other low-carbon electricity sources, as Burke explained.

“Denmark, for instance, has cut its emissions by about a third since 1996 – helped by a switch to wind power for 28 per cent of its electricity. The move to wind in Denmark was achieved via public investment, subsidies and the incentivising effects of a carbon tax introduced in 1992,” he said.

“These and other historical examples show that ‘green growth’ is not just a feel-good label, at least when it comes to domestic greenhouse gas emissions. Growing economies can achieve emissions reductions, but they are only likely to do so if appropriate incentives and policies are put in place.”

The research also indicates that Australia’s large coal endowments make it inherently more challenging for Australia to achieve emissions cuts consistent with global efforts to limit warming to 2°C.

“In 2011, only four per cent of Australia’s electricity was generated using non-hydro renewable sources – mostly wind. The availability of cheap coal in Australia means that in the absence of a strong public policy response, our electricity would remain carbon-intensive for a long time to come.”

Australia’s emissions growth has very recently turned around, primarily due to falling emissions from electricity use. The reversal is a result of a suite of factors, including higher electricity prices, the national Renewable Energy Target, and the carbon price that was introduced in July 2012.

Despite this recent good news for emissions, the research highlights just how far behind Australia is in the move toward a low-carbon economy.

“Australia’s electricity continues to be among the most carbon-intensive in the world,” Dr Burke said.

‘Climbing the electricity ladder generates carbon Kuznets curve downturns’ was published in The Australian Journal of Agricultural and Resource Economics in 2012.

Paul Burke’s papers can be accessed from his website: http://crawford.anu.edu.au/crawford_people/content/staff/acde/pburke.php.

Paul is also on Twitter: @PaulBurke_econo.
 

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