Initial Analysis of the Stern Review for Australian Business and Local Government.
Climate Risk Pty Ltd, a dedicated climate change risk management company has conducted an overnight initial review of the Stern Review for Australian business and local government.
Key Findings for Business
Impacts are three fold, (a) direct physical impacts, (b) indirect impacts as society adapts or is impacted
and (c) the effects of mitigation policies.
Physical impacts include extreme events which Stern suggests will be major issue early on. This willĀ include storms, cyclones, bushfire, flood and coastal damage. Stern says, “This could lead to significant infrastructure damage and faster capital depreciation, as capital-intensive infrastructure has to be replaced, or strengthened, before the end of its expected life.”
“Stern identifies water as one of the most crucial issues for Australian cities and agriculture will gainlittle from carbon dioxide fertilizing due to a lack of water, ” said Dr Karl Mallon, Director of Science and Policy at Climate Risk. ” The global energy sector also receives particularly attention as it is quite
exposed due to high demand on hotter days combined with lower performance of power stations and transmission under such conditions. Reduced hydro electric water levels and a lack of water for power station cooling are also raised by Stern.”
“In terms of secondary impacts we saw some things that we expected in Stern such as higher insurance premiums and reduced access to finance in vulnerable areas where insurance is withdrawn and banks don’t want to lend” Said Dr Karl Mallon. “We also saw some things we hadn’t expected. Stern points out that climate change could disrupt global trade in ways that would have major ramifications for Australian business and industry. One issue he refers to is correlated events where impacts to the Atlantic Thermohaline Circulation would cause problems in Northern Europe and North America at the same time and have a significant impact on the global economy. Another issue is developing countries whos’ resilience to impacts is poor, which is a risk to Australia given the importance of major trading partners like China.”
The good news is that we may consider that Australia like other developed countries will have a comparatively high adaptive capacity to physical impacts due to its wealth, flexible economy and liquid financial markets all of which increase resilience to climate change. However this advantage may be lost if temperatures keep climbing to beyond 3 degrees which Stern says is their current trajectory A short term issue for Australian business is how to respond to the policy measures which have been discussed in the light of the Stern review. They could be opportunities to drive innovation, they could also lead to carbon tariffs on Australia’s high carbon content products.
Key Findings for Local Government
1. The Stern review has cemented the argument that local government and planners are central to the
implementation of policy responses to climate change at local, regional, state and national levels. They
will be at the forefront of mitigation and adaptation strategies and as such need to be adequately
prepared. Stern sees planning as “a key tool for encouraging both private and public investment
towards locations that are less vulnerable to climate risks today and in the future”.
2. However Climate Risk notes that there is a national shortage of planners and the general lack of
climate change knowledge in the practice will any impede mitigation and adaptation strategies as
proposed by Stern. “The Stern Review is a significant piece of work which has the potential to inform
climate adapted strategies in Australia. However what this highlights is that all the will in the world
cannot make up for a lack of planners to implement a mitigation or adaptation policy.” Said Donovan
Burton, Head of Planning at Climate Risk. “This represents a serious issue for local governments who
may face liabilities and litigation if they fail to address the emergent risks set out by Stern and others.”
Climate Risk will be provide comment on the Stern Review for the press from 5am Tuesday
morning Australian time. Interested journalists please contact Dr Karl Mallon on 0412 25 75 21
