Economic And Climate Change - Report Example

Economic and climate change Name: Institution: Economic and climate change Introduction The paper examines the potential impacts due to climate change, strategies to mitigate the effects, predicted effects and the role and differences between Carbon Tax and Direct Action Plan in the mining industry. Companies such as the BHP Billiton mines petroleum and metals, and remains the largest mining company in the world. The company aim is to avoid or minimize its impacts in order to contribute to lasting environmental benefits to all the regions that it operates in. However, changes in water availability as well as severity of events like tropical storms and flooding are expected to affect the production of major mineral in some countries. The mentioned are likely to interfere with profitability of mining activities. Predicted effects on mining sector The mining sector entails extraction of natural minerals and energy resources like liquids, solids or gases such as ores, coal, natural gas and crude petroleum. Extraction can take place through underground mining or open cut, quarrying, dredging, evaporation of pans or operation of wells. In most cases, open pit mining might result into risk of flooding especially during rainy seasons. Severe storms like cyclones might interfere with infrastructure and equipment or damage operations at ports that could interfere export flows (Oleynik, 2005, p. 3). According to Australian journal of mining (2000, p. 5), severe storms have the potential of affecting the mining operations, and might cause temporary closure of mining activities. Additionally, Hogan and Byrne (2000 p. 12) offshore as well as near shore mining activities are potentially at risk of not only intensified storm surges but also tidal waves linked with rising sea levels. Water is essential for various mining activities such as ore processing, drilling and dust management. Therefore, decline in availability of water is likely to increase the total cost of mining activities, or might lead to permanent or temporary closure of certain operations. CSIRO and BoM projections indicate change for Northern Australia, and particularly in average precipitation and decline of about 10% in the southern parts by 2070. Moreover, the South western areas of the Australia are likely to experience a decline in rainfall to 40% by 2070 spring and winter (Bonyhady and Christoff, 2007 p. 67). Nonetheless, changes in precipitation because of long term climatic changes are not only uncertain but are also expected to vary across seasons and regions in Australia. Hence, it is evident that potential changes in availability of water due to climate changes present various challenges to the mining industry, and the BHP Billiton is not an exception. This is because lack of sufficient water could lead to cutback in production across different mines in Australia. Additionally, in 2008, severe floods caused temporary closure of coal mines contributing to decline in not only production but also export volumes. Therefore, if there duration and magnitude of the mentioned disruptions are significant, then there will be direct economic costs for other activities (Thompson and Macklin, 2010, p. 8). It is important to point out interruptions to mining operations in responding to severe weather conditions or other events will cause short term flow of mining products across the country economy, and to some nations if Australia exports large amount of mining products to the world market. For instance, Australia produces about 75% of metallurgical coal exports in the world. Moreover, the expectation is that climate change is likely to interfere with demand of mineral products via the change in demand for end services or products like electricity that depend on mineral resources as input in production. Furthermore, given that Australian mineral products are exported, changes in either productions or demand in response to climate change or policies will impact on the sector negatively. For example mitigation strategies like carbon penalties might reduce the domestic and international demand for mineral demands, which have high carbon footprint like coal (Zahar, Peel and Godden, 2012, p. 45). Theoretical underpinnings or Carbon Tax and Direct Action Plan In July 2011, the previous Australian government introduced climate change policy known as A Clean Energy Future. It was designed with Carbon Tax in consideration with an aim of reducing the greenhouse gas emissions. Various programs were used to implement the mentioned policies with an intention of promoting investment in the renewable energy sector, creating opportunities and encouraging energy efficiency.Gillard Government introduced the Australian carbon pricing also known as the Carbon Tax. In July 2012, the tax became effective. However, on July 17, 2014, the Australian senate repealed it, and it ceased to be in operation. according to the Scheme, all entities that emitted more than 25,000 tonnes of greenhouse gases annually, and were not in either agriculture or transport sector to be issued with emission permits. According to Department of Climate Change, in 2013 there about 260 entities that were liable. Moreover, an estimate of 185 firms paid carbon tax in the same year. The permits are either issued for free or purchased as assistance measures. Following the implementation of the carbon tax policy, there was reduction in the percentage of carbon emissions. According to reports emissions from sectors that are subjected to pricing mechanisms experienced a decline of 1.0% , nine months later following the introduction of the policy. It is important to point out that Australian carbon tax is not in compliance with all fossil fuel, but only have impact on particular emitters of carbon gases. However, on the emitters that it was applicable, the emissions declined following the introduction of the carbon tax policy. According to West Australian mining industry (2004, p. 2) reports emissions from firms subject to the carbon tax declined by about 7%, and carbon tax was the key contributor to it. The Abbott government focused on repealing the carbon tax policy and replace it with the Direct Action Plan. However, it is important to point out that both policies support the reduction of Australian carbon emission by about 5%, and below 2000 levels, a goal that should be attained by 2020 (Abbott, 2012, p. 42). According to the Federal government, there is better way of reducing the rate of carbon emission than imposing the direct tax policy. The proposed strategy is the direct action plan. The goal of the direct action plan is to reduce the rate of carbon emissions by approximately 5%. On the other hand, the Direct Action Plan aims at providing incentives to the industries instead of factories in order to reduce the carbon emissions. The incentives will give businesses and industries an opportunity not only to innovate but also invest in new technologies. The plan also has potential abatement opportunities for mining industries, which entail clean up power stations, energy efficiency improvement, and capture landfill gas among other opportunities (Burns and Osofsky, 2009, p. 17). The Australian mining industry was burdened under the clean Energy package of previous governments. This is because it made the Australian mining industry to remain disadvantaged against its local and international competitors. For the mining industry, the direct carbon tax proved to be a financial penalty with no meaningful contribution to the climate change (Thompson & Macklin, 2010). Evidently, Australia needs Direct Action Plan. Additionally, the public should understand the adapted public policies easily. According to Hunt (2009, p. 78), the Diret Action Plan has different deficiencies, and warns that there is need to implement substantial cuts on the emission of greenhouse gases. This is because failure to do so could lead to global temperature to about 4°C by 2100. Moreover, changes should be based on energy production system. Thus, without drastic changes in the energy sector, temperatures are likely to rise to 2°C by 2030. Therefore, to ensure that the temperature does not rise, the anthropogenic greenhouse emissions should be reduced by 40-70% by 2050. However, the reductions will be 10 times the target Australia has set. Furthermore, because of the climate changes, the prices of iron ore and coal have gone down. This has made the mining firms to not only slash costs but also boost production levels in order to realize profit. Risks and opportunities for mining sector in a carbon constrained world In the 21st century, climate change has become a major issue. The increasing carbon-constrained world is likely to result into various risks and opportunities for the mining industry. Green house gases have been identified as the most significant environmental issue, that the mining industry will experience. The risks link to climate change goes beyond complying with existing local regulatory regimes that restrict carbon emissions, and entail supply chain links. , technology and product risks, physical risks, and reputational risks among others (Oleynik, 2005, p. 21). However, despite the aforementioned risks associated with mining industry due to climate change, there are also major opportunities especially for firms with global operations. The opportunities revolve around international carbon market that have emerged out of carbon projects found in Kyoto Protocol in addition to those under voluntary sector and developing national systems. The mentioned carbon projects are mainly designed not only to minimize carbon emissions but also generate carbon credits that can be traded for either voluntary or compliance market driven purposes. In 2008, the current carbon market was valued at $60 billion, however it grew to approximately 80% in 2009. The increase is an indication of increase in the awareness of issues pertaining to climate change as well as heightening tendencies of investors and industries to take part in carbon trading industry. Moreover, in 2007, various representatives from about 180 nations held a meeting in Bali. The meeting was for the United Nations Climate Change Conference, and its goal was to chart a course for international efforts to end greenhouse gas emissions , when the Kyoto Protocol final expires in 2012. The conference resulted Bali Action Plan being adopted, and the United States and Canada endorsed it. The Action Plan offers a timeframe ideal for international negotiations on controlling greenhouse gas emissions (Moosa and Ramiah, 2014, p. 56). Recommended strategies The potential shut downs or damage to infrastructure in responding to long term or short term climate changes might impact negatively on the profitability of present or future mining activities (Jarvie-Eggart and Society for Mining, Metallurgy, and Exploration, 2015, p. 74). The mentioned might interfere with expansion of mining exploration, investment and operations. The adaptation strategies at the company level has the goal of reducing the potential effects of climate change. There are different adaptation strategies/measures for the mining sector. These include: diversifying production, efficient use of water and moving assets. Stern, (2006, p. 15) ability of the mining sector is to implement effective adaptation strategies. There are different options for example water recycling or desalination that mining firms can utilize. The increase of the greenhouse gases in the mining industry can be reduced by through emissions intensive processes or technologies and uptake of lower energy. For instance, advanced sensors to classify ore as well as invention of new excavation technologies which optimize not only crushability but also size can lower intensity of emissions and reduce energy use. Moreover, fugitive emissions , particularly in coal mining might also decline by not only capturing but also burning methane. Furthermore development as well as uptake of lower emission processes or energy intensive processes/technologies in major end use sectors like electricity might reduce emission from energy and mineral resources (Wright and Nyberg, 2015, p. 15). Conclusion Australian remains the largest exporter of coal globally. This has made the ruling class to be keen on eliminates all the obstacles that could complicate the profitability of the mining sector. For example Abott emphasized that coal is not only good for prosperity but also humanity, and is beneficial for the Australian and world economy. Therefore, adaptation of anti-environmental policies like Carbon Tax and Direct Action plan, is a clear demonstration that despite the increasing global crisis and capitalism, the elites will not opt or anything other than mechanisms that will boost profits in the mining sector. Evidently, emission reductions in the mining sector can only be achieved if global industries changes their focus to development of renewable energy. The Australian mining industry is facing major challenges because of climate changes. The challenges are of diverse nature ranging from direct effects on the mine's operations because of extreme climate changes. It is important to point out that effective adaptation as well as mitigation should be put in place to minimize the effects of climate change in the mining industry. The paper has also provided a comparison between Direct Action plan and Carbon Tax in curbing the effects of greenhouse gas emissions in the mining industry. The Direct Action Plan seemed to stronger impact compared to carbon tax in reducing the emission rates. References Abbott, T. (2012). A Strong Australia. Barton: Liberal Party of Australia. Australian journal of mining: AJM. (2000). Richmond North, Australia: General Magazine Co. Bonyhady, T., and Christoff, P. (2007). Climate law in Australia. Annandale, N.S.W: Federation Press. Burns, W. C. G., and Osofsky, H. M. (2009). Adjudicating climate change: State, national, and international approaches. Cambridge: Cambridge University Press. Hepburn,. S. (2015). Mining and Energy Law. England: Cambridge University Press. Hogan, L. and Byrne, A. 2000, Regional minerals program: An assessment of infrastructure and government services in regional Australia, ABARE Research Report 2000.5, Canberra. Hunt, M. W. (2009). Mining law in Western Australia. Sydney: Federation Press. In Jarvie-Eggart, M. E., and Society for Mining, Metallurgy, and Exploration (U.S.). (2015). Responsible mining: Case studies in managing social and environmental risks in the developed world. Moosa, I. A., and Ramiah, V. (2014). The costs and benefits of environmental regulation. England: Cambridge University Press. Oleynik, I. S. (2005). Australia: Mineral & mining sector investment and business guide. Washington, DC: International Business Publications. Stern, N. 2006, The Economics of climate change: The Stern Review Treasury, H. (Ed), Cambridge University Press, London. Thompson, P. A., and Macklin, R. (2010). The big fella: the rise and rise of BHP Billiton. North Sydney, N.S.W., Random House Australia. West Australian mining industry: Issued as a special edition of the "Australian mining standard." Dec. 8, 1904. (2004). Perth: Melbourne and Sydney. Wright, C and Nyberg, D. (2015). Climate Change, Capitalism, and Corporations. England: Cambridge University Press. Zahar, A., Peel, J., and Godden, L. (2012). Australian climate law in global context. Cambridge, England: Port Melbourne, Vic. Read More

Additionally, in 2008, severe floods caused temporary closure of coal mines contributing to decline in not only production but also export volumes. Therefore, if there duration and magnitude of the mentioned disruptions are significant, then there will be direct economic costs for other activities (Thompson and Macklin, 2010, p. 8). It is important to point out interruptions to mining operations in responding to severe weather conditions or other events will cause short term flow of mining products across the country economy, and to some nations if Australia exports large amount of mining products to the world market.

For instance, Australia produces about 75% of metallurgical coal exports in the world. Moreover, the expectation is that climate change is likely to interfere with demand of mineral products via the change in demand for end services or products like electricity that depend on mineral resources as input in production. Furthermore, given that Australian mineral products are exported, changes in either productions or demand in response to climate change or policies will impact on the sector negatively.

For example mitigation strategies like carbon penalties might reduce the domestic and international demand for mineral demands, which have high carbon footprint like coal (Zahar, Peel and Godden, 2012, p. 45). Theoretical underpinnings or Carbon Tax and Direct Action Plan In July 2011, the previous Australian government introduced climate change policy known as A Clean Energy Future. It was designed with Carbon Tax in consideration with an aim of reducing the greenhouse gas emissions. Various programs were used to implement the mentioned policies with an intention of promoting investment in the renewable energy sector, creating opportunities and encouraging energy efficiency.

Gillard Government introduced the Australian carbon pricing also known as the Carbon Tax. In July 2012, the tax became effective. However, on July 17, 2014, the Australian senate repealed it, and it ceased to be in operation. according to the Scheme, all entities that emitted more than 25,000 tonnes of greenhouse gases annually, and were not in either agriculture or transport sector to be issued with emission permits. According to Department of Climate Change, in 2013 there about 260 entities that were liable.

Moreover, an estimate of 185 firms paid carbon tax in the same year. The permits are either issued for free or purchased as assistance measures. Following the implementation of the carbon tax policy, there was reduction in the percentage of carbon emissions. According to reports emissions from sectors that are subjected to pricing mechanisms experienced a decline of 1.0% , nine months later following the introduction of the policy. It is important to point out that Australian carbon tax is not in compliance with all fossil fuel, but only have impact on particular emitters of carbon gases.

However, on the emitters that it was applicable, the emissions declined following the introduction of the carbon tax policy. According to West Australian mining industry (2004, p. 2) reports emissions from firms subject to the carbon tax declined by about 7%, and carbon tax was the key contributor to it. The Abbott government focused on repealing the carbon tax policy and replace it with the Direct Action Plan. However, it is important to point out that both policies support the reduction of Australian carbon emission by about 5%, and below 2000 levels, a goal that should be attained by 2020 (Abbott, 2012, p. 42). According to the Federal government, there is better way of reducing the rate of carbon emission than imposing the direct tax policy.

The proposed strategy is the direct action plan. The goal of the direct action plan is to reduce the rate of carbon emissions by approximately 5%. On the other hand, the Direct Action Plan aims at providing incentives to the industries instead of factories in order to reduce the carbon emissions.

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