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Climate change and social justice

Speaker: Professor, the Honourable, John Thwaites, former Victorian Deputy Premier and Minister for Environment, Water and Climate Change and Chairman of the Monash Sustainability Institute.

Ten years ago, climate change was regarded as an environmental issue. In the past few years we have come to realise it is one of the greatest economic issues facing the world. But to date, there has been insufficient attention paid to the social impacts of climate change.

The reality is that climate change will affect us all but it will affect the poor the most. There is a substantial risk that climate change will set back all efforts on poverty reduction in the developing world and exacerbate inequity and disadvantage here in Australia .

Tonight, I want to set out how Climate Change will impact on poor countries and on low-income households in Australia . I will examine some of the equity and human rights issues. And I will set out some potential solutions that can both reduce greenhouse emissions and reduce inequity. Climate Change presents opportunities as well as challenges.

It is appropriate in a lecture sponsored by the Monash Law School to point out that lawyers have an opportunity to put concerns about justice and human rights at the centre of the debate as to how we should respond to climate change.

As Rt Hon David Miliband, the UK Foreign Secretary and former Environment Minister has said:

"Climate change raises profound questions of justice and equity: between generations, between the developing and developed worlds; between rich and poor within each country. The challenge is to find an equitable distribution of responsibilities and rights."

First an update on the latest climate change science. The news is not good. In many cases real world data is proving to be worse than even the worst-case projections.

2007 was again one of our hottest years: the fifth hottest on record. 11 of the last 12 years rank in the 12 warmest on record. The sea-level is rising faster than ever before as the ocean warms.

One of the most disturbing indicators of climate change is the Arctic Ice Cap that has been there for the past 3 million years. The last two years have seen an extraordinary melting of the cap. In 2007 there was the largest loss of ice ever - a 20 percent reduction. As of 7 June this year, the Arctic cap is some 55,800 square miles smaller than it was on the same date last year. The melting is accelerating as reflective ice is replaced by heat absorbing, dark ocean. If the pattern continues, its warming effect could reach inland, melting permafrost and altering weather patterns in lower latitudes .

Greenhouse gas emissions are growing faster than predicted. The main reason is that the world energy production is growing, but there are also so-called positive feedbacks that are exacerbating emissions. These include:

• Release of methane from thawing permafrost;
• Ocean acidification decreasing capacity of the ocean to absorb CO2; and
• Decay of carbon sinks and deforestation.

Greenhouse gas concentration is growing at 2ppm each year and we are already close to the level many scientists say is required for dangerous climate change.

What will be the impact on poor countries?

The International Panel on Climate Change has predicted that poor countries are likely to be especially affected by climate change because of their location and also because of low adaptive capacity of poor countries and people.

The IPCC has projected specific impacts on regions:

Africa

• By 2020 between 75 and 250 million people will be exposed to water shortages
• By 2020 yields from rain fed agriculture could be reduced by up to 50 percent. Food production in many African countries will be severely compromised exacerbating malnutrition;

Asia

• Coastal areas, especially heavily-populated megadelta regions in places like Bangla Desh will be at greatest risk due to increased flooding from the sea
• morbidity and mortality due to disease associated with floods and droughts is expected to rise.

Global warming may already be responsible for more than 160,000 deaths a year from malaria and malnutrition and this will increase rapidly with an increase in mosquito borne and water borne diseases linked to climate change.

Increased tropical cyclone intensity will also have a devastating effect on many poor countries that have limited capacity to respond to natural disasters.

The UN Human Development Report has stated that if we fail to tackle climate change, global poverty will increase and development will go into reverse.

Tim Costello and his team at World Vision have been investigating the impact that climate change will have on developing nations and particularly on the poor. Through their experience, World Vision has identified reasons why climate change will have such a devastating impact on poor communities. The reasons include:

• Poor communities rely on the land to survive and are least equipped to cope with rapid degradation of their environment; and
• The poor are the most defenceless against the effects of the conflicts that are likely to arise from international tensions over water, energy and movement of displaced persons.

One of the most significant impacts of climate change will be displacement of people from their homes and climate induced migration. People will be displaced by sea-level rise and flooding, natural disasters like tropical cyclones, and political instability and even wars fought over access to water or arable land. Many of them may become so-called climate change refugees.

It is the low-lying and impoverished nations of the Pacific and Indian Oceans that will be the source of the world's first climate change refugees.

Many of you will have heard about the plight of Tuvalu , the tiny island-state that is predicted to be the first country to disappear as a result of rising sea levels driven by global warming.

But the effects are being felt across the region. The Carteret Islands in Papua New Guinea are in the process of being evacuated. Already it has become impossible to grow many of the staple crops on the Carterets because seawater infiltration has ruined soils. These people live arguably the least carbon intensive lifestyles on the planet, and yet they are being forced to give up their homes.

In the Pacific we are talking about thousands of people, but in the low-lying parts of Asia and Africa , the numbers of displaced people could easily run into millions.

The Stern Review into the Economics of Climate Change estimated that by 2050, 200 million people may be permanently displaced due to rising sea-levels, heavier floods and more intense droughts.

Australian Federal Police Commissioner Mick Keelty in a speech last year warned that:

"Crops could fail, disease could be rampant and flooding might be so frequent that people - en masse - would be on the move…Climate change is going to be the security issue of the 21 st century."

Even those people with little concern for equity and human rights may be a little concerned about that.

Equity, ethics and human rights

But my concern tonight is about equity, ethics and human rights. Starting with equity.

Most of the CO2 in the atmosphere that is causing climate change was put there by the developed world - the USA , Europe and countries like Australia . We have benefited from industrial development, wealth and comfort produced by burning fossil fuels while developing countries suffer its worst consequences. (details slide)

The developing world has only recently started producing greenhouse emissions at anything like our rate. It is worth noting even now, per capita emissions in Australia are still more than 20 times that in India . Yet the previous Federal Government and parts of the business community have used the future growth of emissions in the developing world as a justification for Australia taking only token action to reduce our emissions now. This cannot pass any equity test.

Just as poor countries are paying the price of our past emissions, future generations will bear the brunt of our current and future emissions. These future generations have not caused the problem, yet they are expected to bear the greater part of the burden of climate change.

How much weight is given to the interests of future generations is essentially an ethical question.

Ethics is fundamental to the dilemma of what action we should take on climate change. We should be concerned about the well-being of our children and future generations. We should be concerned if action taken to reduce emissions, such as growing biofuels, has the effect of exacerbating disadvantage for the world's poorest families.

A concern about ethics is particularly important because of the unique features of human induced climate change.

There is a separation between the benefits and costs associated with climate change. Those who benefit from being emitters do not pay the costs. They are paid by future generations and by all people around the globe.

Similarly there is a separation in the efforts to control climate change, between the costs, which will be borne in the near future, and the benefits, that will mostly come later this century and thereafter.

The consequence of these features is that there is little market incentive to reduce emissions. Stern has described climate change as the greatest and widest ranging market failure ever seen.

Climate change also does not lend itself to correction by traditional legal means because of the difficulty attributing causation.

Emissions of CO2 in one part of the world add to the store of CO2 in the atmosphere and contribute to the total greenhouse impact. It is not possible to pinpoint one emitter and identify it as responsible for particular damage suffered in one place. So emitters have not had to compensate those who have suffered loss as a result of climate change.

The consequence is that neither the market nor the traditional legal system has provided any incentive to control climate change. So ethics and human rights have an even more important role to play in formulating policy to respond to climate change.

I would follow two simple ethical rules in developing climate change policy.

First that we should not do something for our own benefit that harms another person. If harm is unavoidable, the victims should be compensated.

And second, we should not exacerbate existing disadvantage.

Subject to these principles, it is reasonable to adopt an economic approach that seeks to maximise the benefits from abatement and adaptation at the lowest cost.

Adopting these principles should ensure a much fairer approach to the treatment of future generations and low emitting poor countries.

Linked to a more ethical approach would be consideration of human rights in evaluating climate change responses. The Human Rights and Equal Opportunity Commission has recently published an excellent paper on Human Rights and Climate Change that points out that many of the broadly recognised rights contained in the Universal Declaration of Human Rights are threatened by the impacts of climate change.

Given the difficulty of using traditional legal causes of action to compensate those who suffer loss from climate change, human rights law may be the best way for the victims to at least achieve consideration if not redress.

As Kyung-wha Kang, the UN Deputy High Commissioner for Human Rights has stated:

"Global warming and extreme weather conditions may have calamitous consequences for the human rights of millions of people…ultimately climate change may affect the very right to life of various individuals… countries have an obligation to prevent and address some of the direst consequences that climate change may reap on human rights."

There are many broad rights in the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights that are relevant to threats posed by climate change. The right to life, to adequate food, to water, to health and the rights of indigenous people are all affected by climate change. As a signatory to these human rights instruments, Australia has an obligation to ensure human rights are protected when responding to climate change.

In our own region, a human rights approach demands that we act to protect and support residents of small islands like the Carterets who are forced to leave their homes by rising sea levels. This may include funding for relocation and protection of culture and agreeing to accept displaced people in Australia .

Domestically, a human rights-based approach requires government to focus on individuals as rights-holders, and to involve them in developing climate policies. A climate change policy that aggravates existing disadvantage may be contrary to the non-discrimination and equal rights provisions in the Covenants.

In Victoria , Government departments and public bodies must observe the rights set out in the Victorian Charter of Human Rights and Responsibilities when they create laws, set policies and provide services. These rights are mostly from the International Covenant on Civil and Political Rights and do not include the rights in the International Covenant on Economic, Social and Cultural Rights that most closely relate to climate change.

However the Charter does incorporate the right to life, and climate change can have both a direct and indirect impact on human life. The impact of heatwaves causing deaths is an example of an area where a climate change response may need to take account of the Charter. On this basis, government agencies would be required by the Charter to take action to reduce this risk of death and do it in a way that does not discriminate against any groups.

The Victorian Charter also provides that "every child has the right, without discrimination, to such protection as is in his or her best interests." This could form the basis for an argument that government bodies should consider inter-generational equity in responding to climate change.

A human rights-based approach is not a mere theoretical construct. It means more than paying lip service to these rights. From my own experience as a Minister weighing policy alternatives and competing demands on limited resources, I am aware that a human rights-based approach may give a very different answer than a strict economic cost-benefit analysis.

Solutions for the developing world

Using this human rights-based approach, I now want to return to possible solutions for the developed and developing world to work together to respond to climate change.

Agreeing a post Kyoto framework

The first task is to agree a global limit for greenhouse gases in the atmosphere. There is debate about the appropriate stabilisation target and the tipping point for catastrophic climate change. Some scientists argue that we are already there. Sir Nicholas Stern argues an appropriate stabilisation target is 450 - 500 ppm CO2e. That requires global greenhouse gases to peak within the next 15 years and halve relative to 1990 by 2050. With this concentration, global average temperatures would be expected to rise between 2 and 3 degrees.

Then we have to work out how to meet the target. Developed countries must take the greatest responsibility for cutting emissions because we caused most of the problem and we have the greatest capacity to act. A quarter of the world's population have no access to electricity, and it is inequitable to say to them that they have to continue to live in the dark while we continue to enjoy the benefits of our development.

However developing countries, in particular fast-growing economies in China and India , will have to be part of the transition to a low carbon economy too.

Over time the most equitable solution is so called contraction and convergence, where developed countries contract first and there is a convergence over time in per capita emissions. Nicholas Stern has estimated that this would require a commitment to per capita emissions by 2050 of around 2 tonnes CO2e. This compares to the current Australian per capita emissions of 27 tonnes. To achieve this, Stern has recommended that developed countries will need to cut emissions by 80 - 90 per cent from 1990 levels by 2050 - a considerably greater challenge than the target recently adopted by the Rudd Government of 60 per cent reduction from 2000 levels by 2050.

Building a low carbon economy

The next challenge is to build a global low-carbon economy that provides opportunities for development in poor countries. Economic progress, education and health are the best protection for vulnerable communities against the threats of climate change. Such an approach is consistent with human rights. It is also in our self-interest to ensure developing countries have the resources and capacity to be part of the climate change solution.

By putting a price on carbon, new technologies will be developed and the behaviour of people and countries will change.

Importantly it will also provide the opportunity for economic and social justice as a global carbon market generates significant financial flows to developing countries to reduce their emissions. Nicholas Stern estimates that a global carbon market should generate financial flows to developing countries of $50 - 100 billion per year by 2030.

Because climate change is truly a global problem, it makes market sense for citizens in Melbourne or London to pay to reduce deforestation in New Guinea or Indonesia . Deforestation accounts for some 20 percent of all global emissions and with the right market signals, trees will be more valuable for saving carbon than for chopping down.

But the global carbon market by itself will not be sufficient to transform the developing world at the speed that is required. If poor countries are to leapfrog the period of high emissions following industrial development that wealthy countries experienced, they will need direct assistance in adopting new technologies and more energy efficient practices.

There are significant opportunities for Australian businesses and organizations here.

The experience we are gaining in improving water efficiency in a dry continent should be useful in other drying parts of the world. Our agricultural knowledge and bio-tech industries should help reduce food shortages. Some Australian businesses may target products and services to assist low-income families in developing countries, for example solar or biofuel refrigeration units to cool and store fresh food in villages without electricity supply. World Vision is supporting the distribution of fuel efficient stoves across developing countries.

And we can use our skills in planning, construction and design to assist in building low-carbon homes and cities around the world.

Assisting with adaptation

We also have an obligation to share out best scientific research and skills to assist developing nations in adaptation to climate change.

I was in Timor Leste recently. As a small island developing state, with a fragile natural resource base and growing population, Timor-Leste faces a severe threat from climate change. The vast majority of the population depends on subsistence agriculture and already faces food insecurity that may be exacerbated by an increase in extreme weather events.

Timor Leste needs answers to basic questions of what climate change will mean for the country. Will rainfall affect the planting and harvesting cycle of crops? What will be the impact of sea level rises? Will coffee production need to move to higher elevations? What will be the impact on malaria and other related diseases?

Timor-Leste like other developing nations also needs assistance in social scientific research for example in building resilience to extreme events.

At the same time there may be much that we in wealthy countries can learn about resilience from countries that have suffered much for so long. The Day After Tomorrow, a movie a few years back with a climate change theme, may have been unrealistic in many regards but there was one scene that stuck in my mind: thousands of climate change refugees from the USA trying to get into Mexico.

I also remember as Water Minister launching a water saving program for refugees and new migrants in Melbourne. I was encouraging the gathered crowd to reduce their daily consumption below 200 litres per day when a Somalian refugee pointed out that he had been used to 7 buckets a day at home!

Australia

I would now like to turn to Australia and the impact of climate change on low-income households in our country.

The person picked to help the Commonwealth and the States to design their response to climate change, Professor Ross Garnaut, will shortly hand down his draft report. Professor Garnaut has already indicated that cuts to emissions will need to be early and deep .

He said we may have to contemplate national emissions cuts as deep as 90 percent by 2050 - up from the 60 percent target we now have.

This will have huge implications for our economy and society.

Importantly, Garnaut has acknowledged that climate change and the measures we take to address it, are likely to hit hardest the poor and those in vulnerable industries.

And he has started a public debate about where compensation and investment should best be directed.

The Problem

The poor will be hit in 3 major ways by climate change.

Cost 1: temperature increases and extreme weather events

The first and most obvious cost will be that caused directly by changes in the weather.

Rising temperatures and heatwaves will pose serious health risks, especially to the elderly. Poor people living in sub-standard housing without insulation will be most at risk.

The number of days in Victorian towns where the temperature exceeds 35 degrees is predicted to rise by up to 20 percent by 2020.

We've seen the impacts of extreme temperatures in recent European heatwaves that led to tragic loss of life. In October 2003, the New Scientist reported estimates that as many as 35,000 Europeans died as a result of the record August heatwave of that year. Many more have died of heatwave related causes since.

And as we all saw in the inundation of New Orleans , when even more catastrophic weather-related events occur, it's those with the fewest resources who have the most difficulty escaping the consequences.

Low-income families in rural areas are very exposed if droughts become more regular, as the CSIRO and other bodies have forecast.

Think also of the potential economic and employment impact on indigenous communities of destruction of ecosystems like the Kakadu coastal wetlands.

Cost 2: abatement measures

The second cost of climate change to poorer communities relates to the financial impact of measures to reduce emissions.

Last year the Brotherhood of St Laurence set out to quantify this by hiring the National Institute for Economic and Industry Research (NIEIR) to calculate the financial impact on families of the major precondition for tackling climate change - setting a price for carbon as either a carbon tax or part of an Emissions Trading System.

Its major finding confirms that without compensating policies, emissions trading could be highly socially regressive.

Whilst low-income earners on average have a smaller carbon footprint than higher income earners - carbon related costs nevertheless consume a far higher proportion of their household budgets.

NIEIR's research shows that poor households spend 6.8 per cent of their average weekly expenditure on electricity, gas and water utilities, whereas high-income tertiary-educated households spend only about 3 per cent of their weekly expenditure on such utilities.

According to the research, pricing carbon at $25 per tonne would add 2.5 percent, or around $670 to the annual cost of living for the poorest Victorian households. Around a half of this cost is for increased electricity and transport and the balance are indirect or embedded costs added to all goods with carbon content.

Poor families don't have an extra $670, and the extra cost would potentially push another 206,000 Victorian households below the poverty line. (defined as 50 percent of median income)

Pricing carbon at $50 per tonne would add 5.1 percent, or around $1,340 to those same budgets and potentially push 409,000 more Victorian households below the poverty line.

So unless we act, we're in danger of creating a new group of the 'climate change poor'.

What really makes it difficult for low-income earners is that spending on carbon-related goods and services is largely non-discretionary.

They have little capacity to adapt to price increases.

• Poor families can't afford newer, more fuel-efficient cars and so will be hit harder by rising petrol prices.
• And they're less able to afford to ‘climate-proof' their homes by adding water tanks, insulation, solar heating and green plumbing.

Most low-income households live in private rental accommodation.

Tenants have little bargaining power to achieve energy improvements such as insulation, and efficient heating and cooling.

There are also significant barriers to energy efficiency in the private rental market as a result of split incentives. Landlords have limited incentive to institute energy efficiency measures because they do not pay the electricity bills. Tenants are unlikely to pay up-front capital costs because they have limited tenure.

Cost 3: Structural Economic Consequences

In addition to suffering the most from rising temperatures and extreme weather events, and potentially paying a higher price for abatement measures, the poor will find it more difficult to adapt to the structural economic consequences of climate change.

We know enough about global warming to know that it is going to bring about significant change to the economy. And wherever there is widespread economic change the vulnerable can be hit hard. Coal-based industries, some manufacturing and farming in marginal areas could all be affected.

The de-industrialisation of the '70s, ‘80s and ‘90s, for instance, destroyed the economies of many communities - and many lives. Australia 's response to that economic revolution was totally inadequate. We didn't plan. Instead, we put a whole generation of middle-aged men with hopelessly outdated skills on to unemployment benefits and disability pensions.

If we go back further in history to the industrial revolution, we can see that the same mistakes were made in the transition from pre-industrial society - which was powered by wind and water - to industrial society - powered by coal.

Regions and jobs that rely on coal will be vulnerable if we are unable to implement new technologies to reduce emissions including wide scale carbon capture and storage. The Latrobe Valley is already an area where there are many low-income families. Losing the power generation industry would be devastating.

The social costs of abandoning communities that rely on coal is one good reason to invest substantial government funds in research and development of carbon capture and storage.

We have to think through now the sorts of changes that are coming to communities that rely on coal, farming, timber and old-style manufacturing, and put in place policies to help them adjust.

The solution

There will need to be some compensation or income support to help low-income households cope with the price rises that result from an emissions trading system.

But the best long-term policy is to make low-income households and vulnerable communities part of the solution to climate change - not simply to provide handouts to meet rising costs. This will mean actively involving these households and communities in action to reduce their emissions through better transport options, green jobs and energy efficiency in the home.

Such a policy is consistent with a human rights-based approach that promotes inclusion and participation by marginalised groups.

It will help reduce electricity bills and transport costs for low-income families now, and in the future.

And it is necessary for two other major reasons.

First, we simply won't meet our climate change targets unless all sections of the population - rich and poor alike - are reducing their carbon footprint.

And second, unless we reassure people in vulnerable communities that their interests won't be ignored in the process of climate change adaptation, their resistance will slow down change.

Action

Governments need to undertake urgent action on three broad fronts to help low income households reduce emissions.

1. Transport and urban planning

In the area of transport, part of the solution lies in urban planning initiatives that place low-income housing nearer to employment opportunities, while increasing the availability and quality of public transport services. This will enable low-income households to reduce their fuel bills and their emissions.

The importance of this is demonstrated by a research project carried out by the Brotherhood of St Laurence into carbon use in poor Victorian households by local government area.

The research found significant variations in carbon use for poor people across different municipalities. The highest carbon use by poor households tends to be in outer metropolitan areas like Melton, Whittlesea, Yarra Ranges and Cardinia, where the use is up to 25 percent higher than in inner Melbourne suburbs: up to 34.9 tonnes in the outer areas compared to around 27 tonnes in inner Melbourne .

The poor residents of local government areas with high carbon use have a relatively low expenditure on public transport, but a correspondingly greater expenditure on private vehicles. In these outer areas people also generally have to travel further to employment and to specialist services like hospitals.

In the short term, government should assist low-income drivers with education on the fuel savings available through changed driving behaviour - up to 25 percent savings.

In the longer term urban planning can play a key role in reducing travel for people to reach jobs and services and in ensuring better access to public transport.

Now that the Federal Government has taken lead responsibility for climate change, it is time for the national Government to play a role in setting an urban planning framework that drives reductions in emissions. It is also appropriate for the Federal Government to use its taxation powers and greater revenue base than the states to support public transport, rather than just roads.

2. Green Jobs

The transformation to a low carbon economy will require a human capital plan to ensure all workers have the skills necessary to prosper in a carbon-constrained world.

In a sense all jobs will have to be ‘green jobs' to achieve the quantum shift that is required. Training and skill development in energy efficiency, waste reduction and sustainability needs to be available across the full range of employment. This will include builders, plumbers, farmers, truck drivers and even lawyers and financiers.

A good example is the eco-driving course the Monash Sustainability Institute has been conducting for cement truck drivers. The truck drivers have reduced their fuel consumption by 25 percent by reducing brake and gear changes and using traffic flow.

It is particularly important that workers in vulnerable industries and with vulnerable skills gain the qualifications they need to succeed in a sustainable economy.

3. Energy efficiency assistance programs

Assisting low-income families to reduce their energy use will:

• Reduce emissions
• Reduce the impact of price rises and
• Be cheaper in the long run.

As far as possible, low-income households should receive energy efficiency assistance before prices rise substantially. This requires programs to be established immediately, rather than wait until the ETS is operating.

The major challenge with energy efficiency is the difficulty in covering all low-income households (approximately 1 million Australia-wide). However it is possible to provide some energy efficiency support for most households in a relatively short period. e.g. simply providing 6 CFL light globes and a low-flow showerhead` will save a household approximately $150 per year (or more with a carbon price) and reduce each household's emissions by 12 tonnes of CO2 over ten years.

With the addition of some other relatively cheap energy efficiency initiatives, electricity bills in low-income households could be reduced by $200 a year, fully offsetting the increased electricity unit price.

I believe we should set at target to climate proof one million low-income households over the next five years.

How can this be achieved?

One way is for each low-income household to be given green certificates that could be redeemed against energy efficiency measures. These would include CFL light bulbs, low-flow showerheads, home energy audits, low energy hot water, insulation and more efficient appliances.

A green certificates system could be used as a spur for more competition and lower costs in the energy efficiency market. It would give greater choice to low income households and allow renters to choose different products than homeowners.

Another option is to make energy efficiency for households an offset in the Emissions Trading Scheme . Priority could be given to low-income households by requiring all or a certain percentage of the offsets to be from these households.

In such a scheme, energy efficiency companies, and potentially non-government organizations would establish large-scale energy efficiency programs for households. The emissions savings achieved would be accredited and sold to generators who could offset them against their emissions trading permit requirements.

I have no doubt that such a scheme would spawn a household energy efficiency industry and lead to a much more rapid uptake of energy efficiency in the home. It would help protect low-income households and as it is low cost abatement, it would bring down the cost of carbon in the Emissions Trading Scheme.

The traditional objection to an energy efficiency offset is that it would lead to double counting of emission reductions, both as an offset and as reduced demand. However this can be overcome by the design of the Emissions Trading Scheme. One way could be to reduce the number of permits available in the market by the number of offset credits created through energy efficiency.

It is argued that this would increase complexity of the scheme. I concede there would be some increased complexity, but surely it is justified if it leads to very significant uptake of low cost energy efficiency that protects low-income households and reduces the overall costs of carbon.

A related option that I urge governments to consider is an early action credits scheme . Such a scheme could start on 1 January next year and operate until the Emissions Trading Scheme commences in mid 2010. Under the scheme, credits earned by early action in household energy efficiency would be recognised as permits under the Emissions Trading Scheme when it commences.

There would be no question of double counting since it only operates before the ETS commences. It would help prepare households for the ETS, and create a carbon price signal and market before 2010. One company has estimated that an early action credits scheme could lead to emission savings of 65 million tonnes of CO2 over ten years.

In Victoria , the new Victorian Energy Efficiency Target scheme commences on the 1 January next year. This scheme requires energy retailers to provide householders with energy saving products that will save 2.7 million tonnes CO2 per year.

The VEET scheme is an important first step in reducing some of the barriers to energy efficiency. However the scheme and other rebate and green subsidy schemes such as solar hot water rebates should be reviewed for their impact on low-income households.

Low-income households cannot generally afford the up-front costs of such schemes and unless specific provision is made for them, low-income households will miss out on the benefits.

Finally on energy efficiency I would like to mention some great examples involving government and the non-government sector working together on energy efficiency.

Phoenix Fridges - retrofitting household appliances

A good example of this is Phoenix Fridges - a joint project by the Brotherhood of St Laurence and the Moreland Energy Foundation to repair, recycle and retrofit unwanted refrigerators to make them more energy efficient.

The retrofitted fridges are then offered at affordable prices to low-income families, helping to slash refrigeration costs and reduce greenhouse gas emissions.

The Phoenix Fridge project also creates skilled employment by training disadvantaged job seekers to retrofit the fridges.

Another example is Sustainability Victoria's Energy Task Force program that offers low-income households assistance with energy retrofits, lowering their electricity bills and providing green jobs for young unemployed people.

These schemes need to be encouraged and massively scaled up.

They demonstrate that done well, combating climate change can open up economic opportunities for the whole community as well as reducing emissions.

How to pay for investments

Of course the measures I have described will have to be paid for.

One way, canvassed by Professor Garnaut, is to allocate a proportion of the funds raised by the auctioning of emissions permits under the Emissions Trading Scheme to assist low income households.

There will be an enormous amount of pressure from affected industries for emissions permits to be free. But this should be resisted, because whether they are free or not, the cost of carbon will inevitably still be passed on to consumers. In Europe, issuing permits to major emitters for free resulted in windfall gains for the businesses with all the cost borne by consumers.

Permit auction revenue should also be available to support research into new technologies, structural adjustment in affected regions and a human capital strategy to support the skills needed in a carbon-constrained world.

Other potential sources of funding include tax incentives such as a ‘green' depreciation allowance for landlords and state based schemes like VEET.

However as I have argued, one of the best ways to fund widespread energy efficiency is by making it an offset under the Emissions Trading Scheme. This is the opportunity for a real win-win for emission reduction and social equity.

Conclusion

If climate change is going to be adequately addressed, ethics, human rights and social equity must be taken into account.

Unless they are, emissions will remain unnecessarily high, resistance to change will hold back action, and social inequalities will increase. We may potentially create a new class of the climate change poor - which is the last thing we must do if we want emissions to go down.

The best way to go is not to compensate the ‘losers' from climate change after the damage to their living standards has been done, but to help them adapt and make them part of the solution.

And an important factor will be ensuring that the emissions trading scheme put in place in 2010 is used to support green jobs and to assist low-income households to adapt.

In fact, if we do things correctly, the transition to a post-carbon economy can actually create more opportunities for disadvantaged Australians, and a fairer country.