The other week we applied greenhouse denialist arguments to the financial meltdown, mainly for a lark, but also to illustrate the point that while we were expected to drop everything to deal with a crisis in capitalism, people were still inventing excuses to ignore the less immediate but far more economically damaging issue of climate change.

Since then, climate change — hitherto a dominant issue in the political debate as well as in the minds of punters, has been reduced to the policy equivalent of cleaning the gutters.

In fact, the financial crisis and climate change share some fundamental characteristics. Both are about risk and how it is priced and managed — and the consequences when risk management goes badly wrong. One of the core beliefs that led to the crisis was the notion that a near-magical formula had been found for diffusing risk to negligible levels.

Rather like an end-of-the-world movie, we discovered too late that this had in fact spread and amplified that risk. And that’s the same approach we’re adopting to the longer-term but more significant risk of climate change, except that rather than slicing and dicing risk and spreading it, we’re simply ignoring it. The risk of climate change is being priced at zero.

The consequences, however, will be the same. If the financial crisis illustrates that you can’t ignore the laws of economic gravity forever — lending to people who can’t repay eventually means they default – climate change is, if you believe the vast majority of credible scientists, every bit as certain.

Both crises also share a need for coordinated international action. One-out action has no effect. The response must be international. But a lack of coordination will also inflict costs and undermine the effectiveness of each country’s individual efforts. We’ve all been forced into guaranteeing bank deposits courtesy of the actions of one country.

That’s all well and good, sceptics will say, but climate change will occur years and decades and centuries and the financial crisis is right now. Jobs and money are being lost now.

This is fundamentally flawed reasoning — and untrue, anyway. The long-term nature of the risk makes the case for early action even stronger, because the costs of mitigation can be minimised that way. And all the evidence suggests we’re starting to see positive feedback loops that are rapidly accelerating climate change.

As Garnaut noted in his final report, even within the space of the period in which he undertook his work, some worst-case scenarios moved into the mid-range of probability for climate change impacts. To delay a decision on climate change, Garnaut correctly noted, is to make a decision – not to act.

Nevertheless, however flawed, it’s powerful reasoning. And it hasn’t been countered by Bob Brown saying that climate change will dwarf the financial crisis. People probably think that’s true, but for them it’s not the point — those costs are in the future, and therefore discounted.

Accordingly, we need some creative thinking from those of us who want urgent action on climate change. Here are some thoughts:

For starters, the issue of business certainty must be addressed. The Government should stop talking about an “ambition” for a 2010 start and commit to a kick-off on 1 July 2010, and it should adopt the Garnaut model of a fixed price until 2012 at least — and specify that price. It might be a soft start, but it would bolster the case put by the likes of Mitch Hooke that business needs certainty for investment planning purposes, rather than further delay. It would also reduce the sovereign risk faced by exporters who might find that, say, Europe adopts measures against economies that have not commenced significant carbon abatement measures, or that their originating in such a country proves a competitive disadvantage with environmentally-conscious foreign consumers. Just ask the wool industry how quickly foreign-organised boycotts can damage you.

Second, we have to depart a bit from economic orthodoxy. After all, everyone else is doing that.

Here’s a personal backflip: rather than using the ETS to get rid of other climate change measures like mandatory renewable energy targets, let’s supplement the ETS with them. The Greens have already lost the extremely brief battle — if it occurred at all, it was probably between 8.15 and 8.16 on Monday morning — for this week’s economic stimulus to be directed toward energy efficiency measures.

But the Government is still talking about a December infrastructure statement – funded god knows how, since there won’t be any surplus left. If there’s to be more infrastructure investment, why not direct it toward energy efficiency measures in households, which yield ongoing savings as well as curbing energy usage, and mass transit options, particularly for suburbs poorly served by public transport?

Once world growth returns to normal, the price of oil will resume its long march northward and we’ll again by wondering why we didn’t use a lull in the oil price to get our transport act together.

Achieving energy efficiencies will require significant investment, which in a period of lower profits will be a more difficult business case for carbon-intensive industries. We could further increase certainty for business by adapting the HECS model and providing interest-free loans to large emitters for investment in carbon reducing technologies, which could be recovered through the ETS starting in 2010. This would bring forward considerable investment into the next two years and enable businesses to reduce their liability under the ETS once it kicks off. Not to mention the minor benefit of actually reducing emissions.

And — deep breath — let’s deal with job leakage concerns about an ETS. As an ardent anti-protectionist it galls me to say it, but we should consider carbon tariffs on countries — especially developed countries — unwilling to take serious action to reduce emissions growth. Not to do so when they’re competing with Australians businesses that operate under an ETS amounts to a subsidy of their contribution to climate change.

This is a slippery slope to protectionism and, at a time when governments around the world will come under inordinate pressure to protect jobs, even slipperier than normal. But the principle of legitimate protection against subsidised imports is already enshrined in Australian economic policy in our — admittedly much-abused — anti-dumping provisions. While anti-dumping provisions simply prevent consumers from benefiting from a foreign manufacturer’s decision to sell below cost, a carbon tariff would provide a small incentive for foreign governments to join Australia in addressing climate change seriously.

The environmental movement needs to get back in the game and try to shape the debate. We can’t afford to wait until economic growth takes off again before wondering what to do about emissions. Governments have shown a capacity to change their thinking in response to the financial crisis. The environmental movement needs to do the same.

Peter Fray

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