Coal: The industry, trade and the future

With the coming into force of the Framework Convention on Climate Change in March 1994 and the first Conference of the Parties taking place in March-April 1995, political and business interest in greenhouse policy is intensifying. Governments in Annex I countries are concerned about their abilities to meet the Convention's aim of returning emissions to 1990 levels by the year 2000 and there is pressure from some countries to strengthen Convention commitments through some form of protocol, Greenhouse is not lust an environmental issue. The Convention is potentially one of the most important trade and economic conventions ever signed and national and international actions under the Convention will affect everyone. For Australia, which is heavily dependent on fossil-fuel exports and energy-intensive manufactures, there are particular concerns about the adverse economic impacts that could flow from any strengthening of commitments. Similar concerns apply to New Zealand, where the export sector is also dependent on energy to add value to its primary products. This paper examines coal's future in a world which may be increasingly bound by measures to mitigate potential climate change. The paper contends that, pending resolution of scientific and economic uncertainties, greenhouse policy measures should be undertaken within a 'no regrets' policy framework. Measures 'beyond no regrets' may become necessary, due to either politically driven strengthening of the Convention or stronger scientific evidence of significant anthropogenic climate change. Such measures would impose substantial and differing economic burdens on Parties to the Convention and there is a need for an 'equitable burden sharing' mechanism. The paper examines various 'beyond no regrets' measures and their implications for equitable burden sharing, including targets, emission reduction rules, international standards, carbon taxes and tradeable quotas.