The RBA has sounded the climate change alarm. Time to sit up and take notice | Greg Jericho | Business


On Friday tens of thousands of school students around the country took to the streets to voice their anger over inaction on climate change. It came three days after the assistant governor of the Reserve Bank of Australia warned about the impact of climate change on our economy. This week really should mark the end of the line for anyone within politics or the media being able to spout climate-change denialism without being met with scorn and jeers. It also should mark the time when boldness and verve becomes the norm for any climate-change policy.

For most people with common sense, our current climate-change policy debate remains utterly frustrating. The problem is there are some in the conservative media and politics who, either due to gross stupidity or a willing desire to fake stupidity, are determined to continue that frustration.

Now one might wonder why someone would actively choose to peddle lies merely to get a gig in the Liberal party or on some unwatched show on Sky News, or to be paid to write poorly some column or blog for News Corp papers.

But at this point, who cares?

Those people have tied themselves to the rotting carcass of climate-change denialism for reasons of profit. We should not now pretend that their views are not redolent with the putrid stench of obtuse irrelevance – an irrelevance made abundantly clear when on Tuesday the deputy governor of the Reserve Bank, Guy Debelle, delivered a speech titled “Climate Change and the Economy”.

It was a landmark speech that sets a precise point from which you can say you are with reality or you have thrown in your lot with idiocy and avarice.

The RBA is not an institution given to radicalism, and so when one of its most senior members states that “both the physical impact of climate change and the transition are likely to have first-order economic effects” it’s a big deal.

Central bankers don’t talk about impacts on the economy lightly or just to please protesting school kids. They only address climate change because they have assessed it has and will continue to have real impacts on the economy.

What Debelle had to say was quite sobering.

He stated that “we need to reassess the frequency of climate events … and our assumptions about the severity and longevity of the climatic events”.

This, he noted, is not news to the insurance industry. Those companies whose entire profit is based around risk have long been factoring in climate change, because unlike the denialist crew who get paid to be ignorant, insurers actually have to factor in reality when assessing risk.

The Reserve Bank also has to factor in risk and Debelle noted that there are many forces affecting our economy and financial stability, but “few of these forces have the scale, persistence and systemic risk of climate change”.

Debelle also noted the difficulties we face are not small.

He acknowledged the difficulties with the transition to a lower-carbon-intensity world will clearly depend upon “whether it is managed as a gradual process or is abrupt”. But he suggested “the trend changes aren’t likely to be smooth.

“There is likely to be volatility around the trend, with the potential for damaging outcomes from spikes above the trend,” he said.

Central bankers prefer to say 10 words of fudge than two of bluntness. So when a central banker starts talking about “damaging outcomes” that’s the time to sit up and take notice.

He also noted that, just in case you were thinking we only need to worry about more droughts and extreme heat events, there is also the problem “where two (or more) climatic events combine to produce an outcome that is worse than the effect of one of them occurring individually”.

And that is bad because “combined with the increased volatility, this increases the likelihood of non-linear impacts on the economy”.

That is, we can’t just say climate change could have a linear impact on our economy – where it reduces growth by a set percentage each year. Rather, the impact could get progressively worse over time.

Debelle acknowledged that we have always had to deal with droughts and cyclones. He noted that “the current drought has already reduced farm output by around 6% and total GDP by about 0.15%” and that even if we return to average rainfall it will continue to weigh on the economy through this year.

So we know weather affects the economy. But Debelle noted that climate change is a trend, not a cycle like weather, where you experience good and bad times.

“What if,” Debelle asked, “droughts are more frequent, or cyclones happen more often?” The shock to the economy “is no longer temporary but close to permanent”.

Permanent shocks to the economy, damaging outcomes, first-order economic events.

At this point anyone still spouting denialist bile in newspaper columns or on the campaign trail needs to be treated like an anti-vaccer at a healthcare expo.

It also means our major political parties need to step up. The Liberal party will most likely need a major defeat (or two) before facing reality, but the ALP also needs to realise that now is not the time for timidity – which Shorten displayed with his rather weak support of the student’s strike on Thursday.

Leadership requires boldness – a boldness now supported by very clear warnings from our most sober economic institution.

The RBA cannot do anything to limit climate change; it can only assess the risks and act appropriately. It is up to governments to take action and it is time to leave the lies and vindictive ignorance of climate change deniers, in the media and in politics, behind us.

Our central bank has warned of inaction. Our children this week took to the streets to demand action. It is time for our governments to deliver.



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