ECONOMIC ISSUES

Australia's Environmental Regulations

Insights

What Has Happened?

Australia has undertaken greater environmental protection methods in the last 10 years to uphold global regulations and address growing climate concerns. Australia considers environmental sustainability as the protection and preservation of  the natural environment, ensuring sustainable use of renewable and non-renewable resources whilst minimising the negative environmental impacts of economic activity. Government environmental management through policies and international agreements, counteracting ‘market failure’ which occurs when the unregulated free market produces undesired outcomes (environmental damage) as only private benefits and costs of production are considered, rather than social costs. Instead, agreements attempt to reach what the Brundtland documented, in ‘Our common future’, as ecologically sustainable development (ESD). Backed by these aims and economic theory, Australia has entered international agreements including the Kyoto Protocol, 2016 Paris Agreement and 2018 National Waste policy - all these agreements in theory will improve domestic environmental conditions. 


Since the turn of 2020, the climate has forced its way into political discourse and society's moral radar - the damaging bushfires and enduring drought in rural NSW, Queensland and Victoria are inextricably linked to climate change - increasing global temperatures are estimated to increase natural disaster threats by 30%. Consequently, meeting international and domestic targets, implemented via policy, will help act on climate change, doing so in a way to avoid significant economic and social costs.

Syllabus Links

Key Environmental Agreements

Montreal Protocol (1987) was one of the first agreements involving Australia, aiming to minimise the depletion of the ozone layer related to the emission of chlorofluorocarbons produced by refrigeration and aerosols. This agreement as one of the first ever, helped increase ozone at the Antarctic zone by 15% as a result. 

Graph indicating the concentrations of pollutants before and after the Montreal Protocol. The agreement has had a lasting impact on dangerous chemical levels in the environment, and is projected to continue to reduce contaminants to 1970 concentrations.


The 1996 UN Fish stocks agreement was a later developed agreement attempting to address the ‘tragedy of the commons’, where in a shared resource space there is no formal regulation upon consumption, and private firms maximise their utility contrary to the common good. This agreement aimed to develop long term conservation and sustainable use of fish stocks. 

The Kyoto Protocol (2005), first ratified as the 1992 United Nations Framework Convention on Climate Change is a 60 nation agreement to limit emissions of CO2 and other greenhouse gases, ratified (validly upheld) by Australia in 2008. It Required industrialised nations to reduce average national emissions by 5% below 1990 levels from 2008-2012. It is also effective in ensuring that newly produced goods meet environmental standards consistent with Australia’s greenhouse gas emission targets - In 2007, removal of incandescent bulbs were permanently replaced by more efficient LED bulbs, reducing emissions by 800,000 tonnes. 

Australia has outperformed its targets under this agreement, as its “direct action plan” is on track to reduce emissions by 5% on 2000 levels by 2020. Domestic direct action policies aim to reduce emissions, increase energy productivity and improve environmental health. The $2.55bn emissions reduction fund is complemented by the Renewable Energy Target and provides support for low emissions technologies (SA investment in 50% renewables, the largest growing source in 2019)

Paris Climate Agreement - the way forward for environmental improvement? 

The 2016 Paris Agreement is a crucial current global agreement - the pact aims to limit temperature increases to below 2 degrees above pre industrial levels, ratified by 186 countries incl. Aus. Under this agreement, each country has an individual plan to confront greenhouse emissions – Australia since 2014 has undertaken ‘Direct Action’. Direct Action policy provides subsidies for firms and farmers to reduce emissions (for example, 200mil is being provided to landfill companies to produce methane and thus electricity). Despite positive intentions, Direct action and associated emission punishments have not been very effective due to lack of enforceability, and emissions are projected to rise by 5% (2015-2020). This is a concern because Australia are already failing to meet wider environmental objectives. The Australian Renewable Energy Agency is leading a stride to reduce emissions under 24gt before 2030. However, from 2018-2019, Australia is predicted to increase waste and pollutant emissions from 53gt to 56gt.

Under the Paris Agreement, Australia is targeting a 26-28% reduction in emissions based on 2005 levels by 2030. The target represents a 50% reduction in emissions per capita. According to ANU, Australia is on track to meet its commitments earlier than expected (2025), representing a policy success. 

the Paris Climate Agreement has been effective because it has encapsulated the world's biggest polluters, to create meaningful environmental improvement. However, the USA's withdrawal in June of 2017 is detrimental, as they are no longer directly accountable via an international agreement to manage emissions levels, despite accounting for a significant proportion of CO2 pollution. In 2016, the USA emitted 224% more CO2 per capita than China.



However, these efforts aren’t without criticism: research from the new Australia Institute suggests that the govt. target is insufficient.  Independent research from Ndevr (private environmental consultant) reveal that Australia’s emissions are the highest on record and will not meet is 26-28% target, as Australia still produces 62% of electricity via coal. 

A significant counterargument to the importance of environmental sustainability and agreements is its damage toward economic growth. For an economy especially like Australia, who are heavily reliant upon natural resources via its narrow export base, environmental neglect can be described as “economic suicide”. Ensuring that the economy intelligently uses finite resources and effectively manages their depletion rates will allow for long term economic growth and an increase in domestic aggregate supply, reflected in the below graph, as natural resources permit economy’s like Australia to increase its competitiveness and productivity in a sector which it is comparatively efficient. Further, by preventing the ‘knee-capping’ of the economy, Australia will also experience greater aggregate demand as exports will continue into the future.

Drawbacks on Growth

Abiding by international agreements, and environmental regulations in general is an expensive process.  In 2017, the US withdrew from the Paris agreement by stating “the Paris accord will place the US economy at a permanent disadvantage”. This accentuates the economic costs of targeting emissions which usually result in structural change and short-term inflation - seen within the Australian economy; the  transitioning from cheaper fossil fuels to a carbon trading/carbon management scheme via the carbon tax raised electricity prices by 10%. This is because the shift to renewables impacts aggregate supply via reduced productivity (of both energy production and businesses) and greater operational costs, reflected by an increase in price from P to P1, and a corresponding decrease in output from Q to Q1. 


Environment and Fiscal Expenditure

Sustainability expenditure holds significant implications for government fiscal policy and budgetary outcomes. Subsidies are regarded as an effective method to implement environmentally conscious expenditure through incentivised direct cash payments. Over the past 5 years, the Government has expressed intent to address environmental concerns via a $390b pledge toward ARENA (Australian Renewable Energy Agency), $2.8b per year in solar and wind energy since 2018, to ensure the satisfaction of targets, and $700m in solar hot water rebates for households, increasing their affordability. 

Despite their apparent benefits, environmental agreements and targets are usually non-binding which reduces their effectiveness, and each country only comprises a small % of global emissions. This results in an absence of effort or legitimacy for agreements. Ultimately, Individual economic efforts to curb environmental damage is futile and negligible.  Australia and other Pacific nations comprise less than 1% of total global emissions.  Global, binding agreements involving China, India, Brazil, the US and other larger European economies are the key to propelling noticeable change.

Mailing List

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Reference List