Climate change is one of the biggest issues facing society this century. There is strong scientific consensus that human induced climate change is real, and that there will be inevitable impacts on society. The extent of those impacts depends on actions taken today.
In Australia, 19 out of the top 20 insurance losses have come from events such as storms, cyclones and bushfires. For example, the storms which ravaged the Hunter region in June 2007 look set to become the third largest insurance loss in Australian history. We believe the frequency and/or severity of such events is set to increase due to global warming, posing a major challenge for the community, governments and insurers. Quite simply, the long term viability of our business is linked to our collective ability to successfully tackle this issue.
We expect the cost of carbon will become a real business expense in the next five to 10 years. Prudent companies are preparing for this now. In 2006, we announced our intention to be carbon neutral by 2012. This does not mean we simply buy carbon credits, adding a new cost to our balance sheet, and then continue operating the same way. It means that we are working to lower our emissions as much as possible by 2012, at which point we will use carbon credits from a variety of sources to offset our remaining emissions.
Weve made a good start. For example, CO2 emissions in our Australian businesses have dropped by 18% from last year, and we reduced our electricity consumption by 14%, avoiding electricity costs of A$630,000. We have plenty of room to improve and were working to build plans for our international operations that lower CO2 pollution.
One of the biggest challenges facing IAG is how society adapts to climate change impacts. Whether its the capacity of building designs and materials to withstand stronger weather events, or peoples awareness about how to lower the risks of being affected by storms, we are increasingly engaging in the challenge that the big issue of the 21st century presents for us all. Its the sort of long term thinking thats needed to confront this problem.
*MTSAT-1R: Satellite image originally processed by the Bureau of Meteorology from the geostationary satellite MTSAT-1R operated by the Japan Meteorological Agency.