Nation in neutral

After a promising, but false, start and 10 wasted years, we are going to have a climate change policy of sorts regardless of who wins the election.

At the 1997 Kyoto meeting then environment minister Robert Hill cut a greenhouse gas reduction deal which was the envy of the world. However, because the Prime Minister denied there was a problem we walked away from Kyoto.

Now John Howard's task force has recommended a cap and trade policy and he has endorsed the broad recommendations of that report.

The differences between Howard's policy and that of Labor's Kevin Rudd are a real problem. They will confuse the people who are going to have to respond to the cap by reducing carbon dioxide - that is you and I, in our homes, cars, workplaces, and (indirectly) in investment decisions made by superannuation funds.

There is a set of critical matters to be dealt with, and they can be done in discrete steps. Arriving at a global cap is the ultimate goal and we have a rough idea of the necessary carbon dioxide reductions.

Deciding on who carries most of the burden is going to be the most difficult political issue ever faced. We can't wait for this to be resolved, hence national and regional caps, considerably below present emissions are urgent.

There is something else we can, and should, do immediately: declare Australia "carbon neutral". The publisher of this newspaper has promised to do that.

To date the discussion and debate in Australia has completely overlooked responses to possible extreme weather events. Tropical and sub-tropical regions already get their share of damaging cyclones and tidal surges.

Regardless of what we do, there will be on-going, gradual increases in temperature for a very considerable time, during which the most severe damage to our economy will occur. Coastal areas and residential development, farming and tourism are the main sectors at risk.

Extreme weather events are matters for local councils and insurance companies. The latter can do their risk assessments and re-arrange their policies and premiums if necessary. However, the Commonwealth and state governments should provide incentives to local authorities to help plan for the future.

Coastal councils should re-evaluate existing planning with the goal of excluding development in areas under potential threat. Town planners and council engineers will need special training courses focusing on environmental and economic risk assessment.

Australia is not the only country reliant on selling minerals in the global market and hence concerned with adjustment to a less carbon-intense economy. Norway is rich due to its oil sales. It has taken a novel approach to addressing its global climate change responsibility. Recently the Norwegian Prime Minister, Jens Stoltenberg, put his country on a path to be the first to be "carbon-neutral" by 2050.

Being carbon-neutral does not require a country to have no greenhouse gas emissions. What it does require is that each tonne of carbon dioxide emitted by the country in question is offset by a tonne not produced elsewhere in the world. Of course, Norway will need to deal with greenhouse gas emissions at home, but first things first.

As Norway emits 54 million tonnes of carbon annually, there will be a high cost to purchase the equivalent quantity on the international market. This is where we learn another thing from Norway, which has positioned itself very well to pay for the permits. Norway has accumulated savings from oil and gas sales to the tune of $US300 billion, accumulated from oil rents and royalties and saved or invested in industries likely to earn similar profits to the oil industry.

Given the income, and extremely good profits, we are making from our coal, gas and mineral sales we should have a nice little nest egg, part of which could be used in the same way. However, we don't have anything equivalent.

Mining royalties are not a special type of income. But they are: you only earn the income once from a mine, not like earnings from a farm or a factory which continue as long as the assets are maintained.

While we have enormous reserves of coal, natural gas, iron ore, oil and uranium, extraction becomes dearer and dearer until one day it costs more than a litre of oil to extract a litre of oil. In economic terms, that's depletion. That day is a long way into the future for coal, but not necessarily for the others.

It would be economic dereliction to not have used mineral royalties to achieve a sustainable future. We should buy carbon on the international market and develop fuels of the future. This should be the focus of our politicians in this election year.

And Australian politicians should agree to a bipartisan climate change policy. Nations facing serious threats, such as war, find the only sensible solution is to unite and work to a common goal.

Is this too much to ask?