Dr Megan Clark, Chief Executive and CSIRO Board member.
Climate change: where science meets markets - presentation by Dr Megan Clark
This presentation 'Climate Change: Where Science meets Markets' was given by CSIRO Chief Executive Dr Megan Clark. Provided here is an adapted transcript of the speech, originally delivered at the ACI2010, 48th World Congress in Sydney, Australia, on 26 March 2010.
2 June 2010 | Updated 14 October 2011
ACI2010: Financial Markets Association
You might be wondering why CSIRO is at this conference. Your business is about making money; you don’t need science.
That may have been the case in the past, but the world has changed.
There are now very large and complex challenges facing us.
To meet these challenges, science and markets are interacting more closely than ever before.
This will be a defining trend of future markets.
Once upon a time, environmental improvements were seen as an expense.
We had to change buildings, processes, and use different energy to meet our obligations of sustainability. Often these investments led to improved efficiency, but it mostly started as a cost and most people saw it as a cost.
Now, somebody somewhere can make money from these environmental improvements. Not just a dollar or two either. The global size of the carbon market last year was US$125 billion and that was just Europe.
But you can't do this alone.
If you’re going to buy and sell carbon you are trading something you cannot see.
Even worse you’re not really buying carbon. You are buying the 'less carbon' between what used to be emitted and what is not emitted now. And you are trading this 'less carbon' this 'nothing' all over the world.
Who makes sure that a tonne of this 'nothing' in Brazil is the same as a tonne of 'nothing' in China?
For example when you buy your petrol at the service station, someone checks and verifies that a litre of petrol in Melbourne is the same as a litre of petrol in Sydney. Who is doing that for your carbon?
No wonder this market is volatile and complex. I don’t know how you keep track of the more than 12 trading standards and instruments for carbon all vying for market acceptance in addition to the Clean Development Mechanisms.
Defining and measuring carbon poses unique challenges.
First, carbon markets involve more than just carbon.
Carbon dioxide is just one of a number of gases humans are adding to the air that are associated with climate change. Other greenhouse gases include methane, which contributes around 20 per cent of Australia’s annual greenhouse gas emissions, nitrous oxides and a range of synthetic compounds.
Science is required to convert these other gases into ‘carbon dioxide-equivalents’, based on their abilities to absorb and emit radiation and their expected lifespan in the atmosphere.
A second challenge is the measurement of emissions. Quantifying emissions from sources such as power stations is complex. It's even more challenging with emissions from sources such as agriculture.
Emissions from livestock, for example, vary depending on diet, climate and season.
It’s not feasible to measure these emissions directly, so scientific models are required to relate livestock numbers and management to greenhouse gas emissions.
Third, emissions of greenhouse gases into the atmosphere can be offset by their removal elsewhere.
Biological carbon sinks such as forests and soil are central to Australia’s response to mitigating climate change. This requires quantifying the flows of carbon into, and out of, vegetation and soils.
For offsets to play a role in reducing the levels of greenhouse gases in the atmosphere, they must offer carbon sequestration that is measurable, verifiable, and additional to business as usual.
There is a major role for science to play in establishing whether one form of carbon abatement has the same effect as another.
This is essential if carbon markets are to play an effective role in managing greenhouse gases. It will require a comprehensive system for measuring and accounting for greenhouse gases.
There is great potential to sequester carbon in trees and soils, which may be valued by market mechanisms seeking the most cost effective abatement options.
However, without a solid scientific foundation, these markets won’t be able to achieve their goal of reducing greenhouse gas levels in the atmosphere.
Biological sequestration involves many variables. For example, the amount of carbon sequestered in a forestry plantation will depend on the species used, the local climate, soil and rainfall.
Growth rates will vary with seasonal conditions, and may be affected by drought, pests, disease or fire.
For soils the situation is even more complex.
Different soils in different locations store very different amounts of carbon. What data there is on soil carbon comes mostly from Europe and North America, where soils are very different from those in Australia.
If markets are allowed to run ahead of the science, there is a danger of creating carbon credits and offsets that do not represent genuine underlying sequestration or emissions reductions. This is not conducive to either a sustainable market or a sustainable planet.
CSIRO has contributed to the development of Australia's National Carbon Accounting System (NCAS), a world-leading system to account for greenhouse gas emissions from land based sectors.
NCAS relates land management to carbon emissions and sequestration, using a combination of remote sensing, land-use and climate data. This is work we are doing with The Australian National University (ANU) and led by Dr Gary Roberts and Dr David Evans.
This presentation was prepared with CSIRO researchers Ross Ackland, David Batten, John Finnigan, Mark Lonsdale, Bruce Mapstone, Ian Prosser, Andrew Reeson, Mark Stafford-Smith, Stuart Whitten, Alex Wonhas, Owain Edwards, Beth Fulton, John Raison, Peter Cacetta and Peter Osman.