• Date:01 Sep 2007
  • Type:CompanyDirectorMagazine

It’s been a big year for Ziggy Switkowski. The former Telstra boss chats to Giles Parkinson about his awakening to the importance of climate change issues since taking over the helm of a government inquiry into uranium mining and nuclear energy.

Ziggy’s big year

According to Ziggy Switkowski, 2006 was the year that the issue of climate change ‘punched through’ to the front pages of the newspapers and was put fairly and squarely on the national, political and business agendas. It was the year of the Stern report, of Al Gore’s film An Inconvenient Truth, the impassioned commentary of Australian of the Year Tim Flannery, and prefaced the sober reflections of the Intergovernmental Panel on Climate Change (IPCC).

It was also the year that Switkowski was appointed as chairman of the prime minister’s review of uranium mining, processing and nuclear energy. And, he is happy to admit, it was the year of his own awakening to the significance of the climate change issue. “I couldn’t grapple with energy and nuclear strategies without some appreciation of the science of climate change. So that’s how my interest really started,” he says.

Switkowski’s background as a scientist – he has a PhD in nuclear physics – and his career as a business leader, provide him with a relatively unique perspective from which to gauge both the science of the problem and its potential impact on business. “Because I have a deep technical background, albeit somewhat dated, it has been an interesting journey to start reading current literature and get back into the field.”

That straddling of the scientific and corporate communities continues today. Switkowski has recently been appointed chairman of ANSTO (Australia Nuclear Science and Technology Organisation), which is the centre of Australia’s nuclear expertise. He is also a non-executive director of the listed companies Suncorp, Tabcorp and Healthscope, and of Opera Australia.

Switkowski has noted the volume of global warming and climate change initiatives encircling the corporate sector. Indeed, a veritable industry of advisory services, emissions audits and energy and water efficiency strategies has emerged in the last 12 months. “Climate change has very quickly risen to the top of the environmental issues in front of company boards,” Switkowski says. “Some people have concluded that it might be the global issue of the current generation. I think that might be a little exaggerated, but it does reflect the importance that some in society attach to it.”

It seems certain that the impact of climate change on the environment, the effect of regulation to encourage adoption of clean energy technologies and the introduction of new regimes such as carbon trading to help reduce greenhouse gas (GHG) emissions, will have a significant impact on the business community.

Switkowski says Australian boards need to determine whether climate change and associated climate drivers are relevant to their business – either because they might affect the way a business operates, the markets in which it competes, the attitude of customers (including foreign customers) which it serves, or because it might help shape their approach to Corporate Social Responsibility (CSR) or other reputational issues.

“You see companies reacting differently,” he notes. “Some who judge that it is good for their reputation and leadership strategies to take early positions and adjust their processes accordingly, have done so. Others who see climate change and its consequences as going to the core of their business, such as heavily energy dependent industries or high carbon emitters, have had to make an early decision to put in place mitigating strategies.”

Switkowski says there are two important factors to consider in relation to climate change. The first is a reality check about Australia’s ability to have an impact on the planet’s climate. It does, after all, contribute just over one per cent of global emissions and its actions alone will make little difference.

“What can Australian companies and organisations do individually to affect global climate change? Very little! The volume of our activities and size of economy are just too small to make a measurable difference. The sum total of everything we might do domestically may be symbolically important but won’t change the pace and direction of global and local climate change. That requires coordinated action by the world’s largest emitters or economies. However, that is not an argument for inaction; rather it’s an argument to focus our efforts on globally consequential steps such as developing carbon capture and storage capability, and helping the adoption of nuclear power around the world by making our uranium resources accessible.

At the same time, as more countries embark upon a path of deep emissions reductions, Australia will have little choice but to play by the new rules.

The other factor is the inevitability that warming will occur throughout this century and beyond. “What we have to do is to adjust to the warmer climate and even take advantage of the changing circumstances. The issues are not so much that average temperatures will increase, because with decades of lead time, everyone can adapt to slowly increasing temperatures: Melbourne might become more like Adelaide, Sydney more like Brisbane. The population cannot be alarmed by that.

“But our climate and weather patterns are going to become much more volatile. We need to think about it as businesses and individuals. What do more extreme weather events imply – extended droughts, floods, especially severe cyclones, lightning and hail storms, more serious bushfires and summer seasons with many more days of 40+ degrees and with overnight temperatures that don’t fall below 25 degrees? At a minimum, we have to design our emergency response and social systems to work properly under these more demanding circumstances.”

Switkowski says it is inevitable that the price of electricity and fuel in general will rise, as will other environmentally sensitive commodities such as water – and that those rises could be steep. He believes business is aware of that, and measures are being put in place to conserve energy, to improve efficiency and to design products with lower water, energy and emissions intensity.

And, as the world moves away from use of fossil fuels, and as water scarcity becomes more intense, there will be winners and losers. “As we move to greener and a more environmentally friendly set of processes, the entrepreneurial, the innovative, the farsighted, will create new businesses. Many people see exciting commercial opportunities for green products and services and for Australian leadership in this area.”

Carbon is another issue that looms large on the horizon for corporate Australia and the consumer. Switkowski notes that both the Government and the opposition are moving carefully on this issue and he argues that they are right to do so. “It is more important that we set in place the right environmental strategy and long-term goals than to score political points or trigger a burst of well meaning, but pointless activity. Any emissions trading framework must have appropriate mid-term and long-term GHG targets, a sensible CO2 permit pricing trajectory, coverage of as many emitting sources and industries as possible, flexibility as commercial and community behaviours evolve and a careful eye on economic consequences and the strategies of our trading partners.”

But he says the whole trading regime does play to the strengths of Australia’s financial institutions, who are among the most innovative in the world, and our world class economists. He says Australian financial institutions should have a central role in helping design an emissions trading framework that could be bolted onto other international schemes or contain design elements that the rest of the world could copy.

Switkowski argues that the challenge to meet the quantitative goals set in reducing greenhouse gases are so great that governments, corporates and the public will need to use every tool available. A properly designed emissions trading system will help drive the right behaviours and direct capital investment to cleaner alternatives. “We’re also reasonably profligate emitters on a per capita basis,” he notes – and moves to conserve energy, tighten building regulations to achieve energy efficiencies, while enabling an increasing use of renewables are important steps in the right direction and the progressive deployment of nuclear power. “All these things have to be in place,” he says.

The reason is that Australia – and other countries – will have to make a dramatic U-turn in their emissions trajectories if they are to meet the sort of goals described in the IPCC report – where the objective is to limit global warming to less than three degrees by the end of this century.

To do that, many countries, and the Labor party in Australia, are talking of a 60 per cent reduction in emissions from 1990 levels. In Australia’s case, emissions in that year totaled 500 million tonnes. The country’s business-as-usual growth scenario will put those emissions at 1,000 million tonnes by 2050. That means, if the 60 per cent reduction is met, Australia’s emissions path needs to turn back to 200 million tonnes, or an 80 per cent cut from business as usual.

“Australia’s challenge is massive and it mirrors the global situation,” he says. “I don’t despair of the future so much. I am more concerned that environmental tasks we set ourselves are based upon clear-eyed expectations of what we are trying to achieve and why, and that we measure progress appropriately. While I don’t discount the merits of many people doing many small things to improve our environment, if our task is to reduce emissions globally, then Australia’s goal must be to leverage the relationships we have with the biggest emitters and to develop new technologies for international markets.”

Switkowski notes that the biggest emitters – particularly the US and China – have only recently become fully engaged in the debate. He concedes that the balance of probabilities suggests emissions will continue to rise for some decades yet and that the world will have to adapt to a warmer and more volatile climate. But he says it’s too early to be discouraged. Once the most important emitters – the US, China, Japan, India, Russia, Indonesia and the EU – agree on steps to tackle the issue, an outcome on the horizon,?the rest of the world will support it and rapid progress would follow.

“Interestingly, the outlook for coal is for increasing global demand for a generation or more (currently 5.5 billion tonnes per year producing 20 billion tonnes of GHG, or half the world’s emissions). This suggests that a national priority for Australia should be improving the efficiency of burning coal and developing the means for capturing and storing combustion products. When it comes to GHG mitigation, there may be nothing more important for us to work on.

“Also as another 20 or so countries consider moving down the nuclear path, and nuclear power moves above 16 per cent of worldwide electricity generation, Australia joining that community and facilitating access to our uranium could also lessen the dependence upon fossil fuels in a material way.”

Switkowski says there is no doubt that the quality of debate around nuclear energy has improved dramatically in recent years and, he notes with some relief, can even be discussed in polite society as a valid, even preferred, option for future baseload electricity production in Australia.

As an example, he notes that as recently as 2006, the three biggest objections to nuclear power in Australia were concerns about long lived toxic waste, the possibility of a catastrophic accident such as Chernobyl, and terrorism or proliferation. Those fears were forged during the 70s and 80s and have remained unchallenged for the past 20 years.

But in 2007, against the background of national concerns with global warming, Switkowski says the principal reservations about nuclear energy have an altogether different and commercial hue. Now, they are about costs, lead-times and proposed locations – although the treatment and storage of radioactive waste remain of general concern.

“I am a product of an era where nuclear physics offered a very promising, intellectually satisfying and even glamorous career,” he says. “That fell off the charts in the 1970s, but some people are now referring to a ‘nuclear renaissance’.”

Not only does ANSTO represent something of a homecoming for the former student, the timing is also good. “There’s no doubt that things have changed dramatically and positively in the last year. There is a growing awareness and appreciation of the many contributions of nuclear technology –?in medical diagnosis and treatment, radiopharmaceuticals, and in industry. With a new research reactor, a supportive government and emerging national interest in nuclear energy, there is a buzz around ANSTO and a confidence generated by the broader community respect for the quality of the people we have here and the work that we do,” says Switkowski.

The Hon. Malcolm Turnbull MP, Minister for the Environment and Water Resources, will talk about the challenges and opportunities facing the business sector in a carbon-constrained world on Thursday, 27 September at an AICD lunch at the Amora Jamison Hotel in Sydney.