This report aims to assist the Sino-Australian bilateral relationship adapt to meet China’s new low carbon emissions policies and to facilitate a smoother transition to a low carbon future.  Southwestern University of Finance and Economics (SWUFE), Chengdu, China and the University of Queensland, Brisbane, Australia held a workshop at SWUFE to develop a guide to China’s low-carbon policies and their implications for the Sino-Australian energy trade and sectors.  This report results from the workshop.  Chapter 3 contains the guide to China’s low emission policies and discusses market-based experiments within China’s command-and-control electricity sector.  Chapter 4 discusses Australia’s poorly implemented neoliberal policies within its energy sector and provides an informative market-based case study for China on what to avoid.  Chapter 2 discusses the implications of Australia and China’s low emission policies. Chapter 5 discusses barriers to the transition to a low emissions economy.

Climate change is one of the world’s major challenges.  Others include increasing inequality and poor economic growth, creating a decline in inclusive growth.  Declining inclusive growth and climate change are interrelated wicked problems.  Their solution is technically and economically viable given appropriate investment but the absence of a price on carbon in Australia is a major obstacle to directing investment consistent with a low emissions future and government infrastructure investment calculations use a frozen high 'discount rate' when interest rates are at historical lows and underemployment rates are at historical highs.

Australia is transitioning from a mining to a more service orientated economy.  However, Australia’s uncoordinated growth and climate change policies are hindering inclusive growth and the transition to a lower emissions economy.  Growth and climate change policies need bringing together to engender confidence and direct investment compatible with a low emissions future.  Notably, Infrastructure Australia has gone some way to address this issue at the national level but the lack of transparency and independence in other jurisdictions and the frozen high 'discount rate' undermine Infrastructure Australia’s effectiveness to address climate change and inclusive growth. Remarkably, the organisation Drawdown provides a ranking of the top 100 technologies that can reverse global warming and many of these same technologies can also promote inclusive growth, which can bring together the climate change mitigation and inclusive growth agendas.

Similarly, Australia’s uncoordinated energy and climate change policy and poorly implemented neoliberal policies in the energy sector are undermining investment confidence and hindering both inclusive growth and the transition to a lower emissions economy.  Energy and climate change policies need bringing together to restore investment confidence within the electricity sector.  The Australian Energy Market Operator’s Integrated Systems Plan has gone some way to address this problem but there is a requirement to write climate change objectives within the National Energy Objectives to integrate energy and climate policy to enhance coordination.

Poor policy coordination is also hindering solutions to a host of other interrelated wicked problems.  These wicked problems include massive increases in retail electricity prices, private school fees and private health insurance, the inability to undertake major tax reform, such as introducing a tax on sugar or carbon or introduce road user charges to replace the declining revenue from fuel excise duty.  There is ample and sound evidence-based research to solve these wicked problems but there is an inability to enact policy in the interest of the electorate.

The key findings of this report are four common barriers to enacting policy to solve these wicked problems.

1. Political donations present a conflict of interest.

2. Adversarial politics and political wedging reduce the ability to address complex problems.

3. There is an absence of academic economists informing the public debate to provide impartial advice.

4. Unrealistic models of the economy and human behaviour are misinforming policy.

Chapter 5 discusses methods to address these barriers.