28 Mar 2013

Battening down the hatches - Productivity Commission recommends reforms to adapt to climate change

by Brendan Bateman, Nicholas Allan

The Productivity Commission has set the agenda for climate change policy areas where attention should be directed, and its recommendations are likely to be seriously considered.

The Federal Government recently released a report produced by the Productivity Commission in September 2012 which examined the obstacles in Australian law and policy to effective adaptation to the impacts of climate change. The Commission recommended a series of reforms to address those obstacles and clear a path formore effective adaptation. These issues are separate to the debate regarding the causes and mitigation of climate change itself and so are likely to be received seriously by stakeholders with views across the spectrum of that debate.

The impacts of climate change which the Commission has considered include increases in average temperatures, rise in sea levels, changing rainfall patterns and consequential changes to the location, frequency and intensity of extreme weather events such as bushfires, heatwaves and hailstorms. It defines adaptation as actions taken to respond and adjust to such impactsby households, businesses and governments.

The Commission has divided its recommendations into reforms which would address current climate change impacts, and those which are required to adapt to future climate change impacts. It also noted certain reforms which failed the cost/benefit test to which it subjected its recommendations, including household insurance subsidies and mandatory reporting of all adaptive actions.

Reforms to address current climate impacts

Reducing perverse incentives in tax, transfer and regulatory arrangements that inhibit movement of labour and capital or reduce incentives to adjust to climate change, including land tax and stamp duty, restrictions on water trading and distortionary transfer payments such as drought support.

Improving the quality of natural hazard mapping by updating and expanding existing initiatives regarding flood-risk information and local-area climate projections.

Clarifying the roles, responsibilities and legal liability of local governments, and improving their capacity to manage climate risks. The Commission makes a number of recommendations on this issue which highlights the importance of local government in climate change adaptation, including through emergency management and management of high risk areas. It recommends that State Governments:

  • publish and maintain a list of laws imposing responsibilities on local governments;
  • ensure councils have sufficient technical and professional expertise and financial capacity to plan and adapt; and
  • clarify the legal liability of councils in making decisions on climate change adaptation. The Commission cites as a barrier the unwillingness of councils to publish information on vulnerability of properties to climate change impacts due to concern over legal liability for reduced property values.

Reviewing emergency management arrangements, with public consultation, to better prepare for natural disasters. This would include a review of the adequacy of disaster-mitigation infrastructure.

Reducing tax and regulatory distortions in insurance markets. State and Territory taxes and levies on general insurance are a barrier to adaptation and should be replaced. In addition, proposals which would require all households to purchase flood insurance should only proceed if they pass a cost/benefit analysis.

Reforms to address future climate impacts

More flexible land-use planning regulation to ensure that climate change risks can be incorporated into decision-making. The Commission recommends that flexibility be integrated into planning legislation, strategic planning documents and local government schemes. An example is the use of "time-bound" or "trigger-bound" development tools where approval can be given for a specified period or until a particular event occurs.

Aligning land-use planning with building regulation in managing environmental hazards. The current overlap between these areas of regulation presents both an obstacle and an opportunity in this regard.

Developing a program to consider climate change in the building code. The Commission recommends that COAG should provide formal direction to the Australian Building Codes Board to:

  • monitor projections of climate change risks to buildings; and
  • revise the standards in the National Construction Code to take into account projections.

COAG to commission independent inquiry of adaptive responses for existing settlements that face significant climate change risks such as storm surges, flooding and bushfires. Following this, the Commission recommends State and Territory governments manage risk to their own assets and provide clear guidance and support to local governments in high-risk areas.

The wide-ranging nature of the Commission's brief for this report means that many of its suggestions are open-ended, with further reviews to be conducted at various levels of government focusing on specific areas. However, the Commission has set the agenda for those policy areas where attention should be directed and its recommendations are likely to be seriously considered, especially as climate change impacts become a growing fact of life in Australia.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.