ENVIRONMENTAL ECONOMICS RESEARCH HUB WORKSHOP 20 MAY 2008 Project 10:

1. ENVIRONMENTAL ECONOMICS RESEARCH HUB • WORKSHOP 20 MAY 2008 • Project 10: • Economic policy for climate change in Australia and the region • (in-practice title for “Adaptation and economic responses to climate change” ) • Frank Jotzo • Research School of Pacific and Asian Studies, ANU

2. Context, topic and aims of the research • Improve the understanding of economic responses to climate change, and of options for policy • economic system response to environmental change • role of economic policy for climate change adaptation • engaging Australia’s region, incl in climate change mitigation • Focus on Australia’s future challenges • take into account experiences from around the world • explore economic adaptation issues in neighbouring countries • Links to the region esp Indonesia • establish and strengthen links to researchers in the region • facilitate dialogue with policymakers both ways • Aim to produce policy-relevant knowledge

3. Associated researchers • Dr Jack Pezzey (ANU) • economics of climate change and policy, mitigation • Dr Regina Betz (UNSW) • climate policy instruments, experimental ec’s • Dr Budy Resosudarmo (ANU) • Indonesian environmental ec’s and policy • Dr Pierre v.d. Eng (ANU) • economic history of environmental change • Dr Jean-Pascal Bassino (U Montpellier) • economic history of environmental change

4. Scope of the project • Project supports selected research activities, leveraging existing activities and interests • PhD top-up scholarships (none awarded yet) • Research assistance • Some salary offsetting • Research exchanges with Indonesia • Outreach • Workshops • Topic responding to an evolving policy environment • Prospects for engagement on mitigation now much better than at inception of research proposal • Large-scale research effort now underway under National Climate Change Adaptation Research Facility (NCCARF), Griffith U

5. Research theme:Economic responses to environmental change: past experiences Drs Pierre van der Eng and Jean-Paul Bassino • ‘Lessons from the past’ that can inform cc adaptation policy? • How did people and their economies respond to large-scale env change? • Migration, structural change, what about factor prices? • What did governments do? • How did expectations match up with evolving reality? • Examples: Drying of southwest WA, rice growing in Japan/Indonesia, dust bowl… • Events • Asia-Pacific Economic and Business History Conference, theme “Responses to Environmental Change” • Workshop for researchers & policymakers at ANU, Nov 2008 (EERH funded) • Workshop at U Montpellier, early 2009 • Session at World Economic History Congress, Utrecht 2009

6. Research theme:Role of economic policy for climate change adaptation • Autonomous vs induced adaptation • Markets will drive some or much adaptation • land prices • insurance cost • But there are market failures • information, myopia • split incentives • inability to accurately factor in risk of abrupt systemic change • And policy failures • planning laws • Insurance market regulation • Drought assistance? • Where should gov’t come in, where should it stay out? • only support better information, or try to direct economic behaviour? • Who deals best with risk and uncertainty?

7. Research theme:Engaging Australia’s region • With Dr Budy Resosudarmo • Need for improved understanding of cc adaptation needs and options in Australia’s region • see AusAID Environment Strategy • Pacific obvious challenges, but Indonesia: large populations vulnerable • Indonesia: tremendous opportunities for reducing GHG emissions: forests, coal • Building on links to Indonesian researchers and to policy community • High-Level Policy Dialogue, Bogor/Jakarta, Dec 2007: climate policy sessions with top officials • UN climate conference, Bali Dec 2007: discussions with researchers and policymakers • Project “Economic governance and public financial management in Indonesia” with Australia-Indonesia Governance Research Programme • Bringing researchers from the region to Australia for working visits

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9. Research already underway by Frank Jotzo (Research Associate) • 3. The international linkage of ETSs How and to what extent should Australia link its emissions trading system internationally? • Joint with Dr Regina Betz, UNSW/EERH • Linked in with project under the Climate Strategies network, Europe • Public events and policy dialogues • Public forum on ETS linking: 8 expert speakers incl from Canada and NZ, high-level government speakers • 120+ participants from government, industry and research community • “Emissions trading for Australia: lessons from Europe”, Dr Felix Matthes • Presentations at Bali COP 2007, Poland COP Dec 2008 • Continuing toward policy papers and journal publications • Aus-NZ linking • Linking in a post-2012 international regime