Actuaries slam Govt neglect of climate change economics

Insufficient focus has been directed to the economic consequences of climate change in the Federal Government’s recent intergenerational report, the Institute of Actuaries of Australia (IAA) contends.

The IAA has lamented the lack of attention placed upon issues of environmental intergenerational equity within the intergenerational report, arguing that climate economics would be a “major force influencing intergenerational equity” long into the future, IAA president, Fred Rowley, said. The IAA has recommended that the government undertake a detailed investigation examining how climate change could alter intergenerational equity, and construct the economic models that could guide the transition to a more environmentally-sound society. “Now that we understand the extent of the problem, we should start funding the research and modelling [of the] transitions required to reduce the impact on future generations,” Rowley said. “Actuaries are experts in insurance and risk management, and in the design and management of funding mechanisms involving risk and uncertainty.” Rowley said that governments, businesses and academics must begin analysing the most salient issues pertaining to intergenerational equity: the ageing population and the economic ramifications of climate change. Chief concerns included: addressing the complexity involved in modeling the impacts of climate change at regional and country levels; developing an effective carbon emissions trading scheme to convey realistic pricing signals that will influence key investment decisions; and asking whether investment guidelines and objectives of the Future Fund should allow for the impact of our economic responses to climate change. The first intergenerational report briefly addressed environmental concerns, stating that “early action to prevent environmental damage, rather than late action to remedy it, is likely to reduce long-term costs”.