As the debate on pricing carbon gains political traction, it is worth remembering what a carbon price is for. Opponents of carbon pricing say we should do nothing because action on climate change poses a threat to our domestic economy. Yet the costs of inaction are significantly greater; the Stern Review found that acting on climate change would cost the global economy approximately 1 percent of GDP, while inaction would cost between 5-20 percent of GDP. Australia is more vulnerable than most to the impacts of climate change on our economy, resources and way of life.

Tackling climate change is not without cost, and equally, there is no silver bullet to solve this monumental challenge. But the Low Carbon Growth Plan for Australia , released in March this year by ClimateWorks Australia, demonstrates that by applying a portfolio of least cost actions, significant reductions in carbon pollution can be achieved without significant impact on our economy.

In fact, Australia could reduce its emissions to 25% below 2000 levels over the next ten years for an average annual cost to society of just $185 per household - the cost of a cup of coffee per household per week. While this excludes the transaction costs of capturing each opportunity, these would most likely be offset by the co-benefits of reducing emissions, such as economic growth from the development of new clean energy technologies and services, and the avoided social, environmental and economic costs of the impacts of climate change.

Opportunities for significant carbon abatement exist across the entire Australian economy, as demonstrated in Figure 1.

Figure 1 - 2020 GHG emissions reduction societal cost curve

Australia's transition to a low carbon future will be difficult to achieve without a price on carbon (or other economic instrument to drive a reduction in emissions) and other targeted actions. A carbon price significantly increases the volume of opportunities that are profitable to businesses, sending a clear signal to invest in clean energy technology and bio-sequestration, and to encourage the efficient use of the energy we produce. As shown in Figure 2, the carbon price associated with Garnaut's 25% scenario would more than triple the volume of opportunities to reduce carbon pollution that are profitable.

Figure 2 - Impact of carbon price economics

But a carbon price alone will not capture the full volume of abatement potential. The opportunities that appear below the line in Figure 1 - focused on energy efficiency in the Buildings, Industry and Transport sectors - already offer financial savings, yet are not being captured by businesses, governments and individuals. In fact, our research finds that Australia could be saving AU$5 billion per year by 2020 through energy efficiency in these sectors alone. The scale of the economic benefit available to businesses demonstrates that non-financial barriers - such as non-market electricity pricing, lack of minimum efficiency standards and limited access to capital - are preventing their capture.

Importantly, the opportunities that are already profitable to investors provide us with a place to start on action to reduce Australia's emissions while we wait for a carbon price. These opportunities are typically captured through improving the efficiency of appliances, equipment, vehicles and lighting, and by designing more temperature efficient buildings to reduce the heating and cooling load. Given that energy efficiency measures typically save money, it can also be a valuable way to build community consensus for action on climate change.

The majority of OECD countries already have a price on carbon, and even our most significant trading partner, China, is preparing to pilot emissions trading in specific industries and regions. A recent World Bank report found that Brazil could reduce emissions by up to 37 percent by 2030 without affecting its economic growth, clearly demonstrating that reducing greenhouse pollution is not incompatible with economic growth.

Developing new clean energy technologies and services ensures Australia remains internationally competitive in a low carbon future. Reducing carbon pollution also reduces the environmental, social and health impacts of climate change which are expected to have significant long term economic costs.

A low carbon economy builds business and community resilience to the effects of climate change, and encourages adaptability and competitiveness, both domestically and internationally.

The Low Carbon Growth Plan shows that we have more opportunities to get started on this than many people realise. ClimateWorks Australia is now working to enable business and governments to harness these actions. We encourage you to join in.