Thursday, September 4, 2008

Analysis: Ross Garnaut's climate change blueprint

By chief political correspondent Lyndal Curtis

ABC News Online, Posted 1 hour 19 minutes ago
Updated 1 hour 6 minutes ago

The Federal Government's climate change adviser Ross Garnaut has outlined the path he believes Australia should take in reducing its greenhouse gas emissions.

The latest instalment of his review of climate change options outlines a number of different scenarios.

But the one he prefers would see Australia reducing greenhouse gas emissions by 10 per cent by the year 2020.

On the way to that goal, he recommends an interim arrangement which would put a cost on carbon at $20 a tonne in 2010, rising with an interest rate and inflation each year until 2013.

Are these the missing figures of the debate?

Professor Garnaut has looked at where he believes Australia should be - either with an international agreement on reducing greenhouse gas emission, or without one.

His first report warned climate change is a diabolical problem could mean Australia's heartland would be lost and economic growth could be cut.

He said doing nothing would lead to dangerous climate change and the developed country which would be hurt the most would be Australia.

He's repeated his belief that doing nothing is not an option, saying if that happened then the world would head for dangerous climate change at a rapid rate.

Since then the Government has accepted his advice to proceed with an emissions trading scheme it calls a carbon pollution reduction scheme, but until now that debate has proceeded without a framework of what targets Australia should aim for, and at what cost to business.

Today, with the help of some economic modelling, he has put some meat on those bones.

What does professor Garnaut recommend?

To start with, to get Australia through the rest of the period covered by the Kyoto agreement on climate change until the end of 2012, the professor recommends carbon pollution permits with a fixed price starting at $20 dollars a tonne and rising each year with a 4 per cent interest rate plus inflation.

He says that start will make a very smooth transition to the cuts in emissions and carbon prices which will be put in place after 2012.

From 2013 he recommends Australia aims for a reduction in emissions of 10 per cent by 2020 - that is, 10 per cent cuts to the level of emissions recorded in the year 2000.

For that to happen it would mean a carbon permit price of $34.50 by 2020.

It would cut Australia's economic growth by 1.1 per cent by 2020 and consumption by nearly 2 per cent.

And he says the long-term impact would be a cut in emissions by 80 per cent by 2050 - well above the Government's stated target of 60 per cent by 2050.

He says this is a realistic step.

But this 10 per cent cut in emissions would be conditional on achieving an international agreement to stabilise carbon emissions at 550 parts per million.

He believes that such an international agreement may not be achievable at the Copenhagen conference at the end of next year because it would be too soon after a new United States president is inaugurated.

But he seems reasonably optimistic about the chances of a global agreement some time not too long after that.

What is the option if there is no such agreement?

The Professor says that would put Australia in an ad hoc policy world and he's recommended under that scenario the cuts to emissions to be achieved by Australia be scaled back to 5 per cent by 2020.

It would mean business paying more for permits by 2020 at $52.60.

Part of the reason for that is that there would be no international market for permits to allow them to be traded so the opportunities to buy cheaper permits from low carbon economies wouldn't exist.

That level of cuts he believes would get Australia to the point of the Government's stated 2050 target, but he says it would be an unhappy conclusion of discussions in the post-Kyoto period.

He says mitigating the effects of climate change in what he calls this ad hoc world is deeply problematic.

It's more expensive, and as noted earlier doesn't allow international trade in permits or allowing mitigation to be undertaken in places where the cost of that action would be low.

It makes the political problem of dealing with the trade-exposed high-emitting industries much more difficult, with the risk of industries moving to countries with much weaker carbon emission reduction regimes.

Does Professor Garnaut have a 'perfect world' option?

He does. He thinks that Australia should aim to stabilise emissions at 450 parts per million, which would mean deeper cuts of 25 per cent in emissions by 2020.

That would get Australia in 2050 to an 80 per cent cut in emissions.

He believes this is what Australia should be aiming for and it would in Australia's national interest, but his assessment is that to try to get there now wouldn't succeed.

He says the path to that is to start with 10 per cent cuts.

But he says Australia should put the 450 parts per million goal in international talks, saying it would like to end up there and is prepared to go that far.

If, in the unlikely event, the world agreed, the Professor believes Australia should move to this more perfect world or aspirational option.

He has talked to his British counterpart, Sir Nicholas Stern, who believes Australia does have a crucial role to play in international negotiations because of the diplomatic relations it already has with the major developing countries in the region like China and India.

Sir Nicholas also believes Australia has the capacity to influence the other countries which are high emitters per head of population - the United States and Canada.

What reaction can be expected to his recommendations?

The Green groups are likely to be scathing about this start.

It's closer to the low and slow start that business and the Opposition want and Greens Senator Christine Milne has already warned that a target of cutting emissions by 15 per cent by 2020, which is above the option Professor Garnaut recommends, would mean playing no part in preventing runaway climate change.

And even Professor Garnaut acknowledges that even if the aim was to stabilise emissions at the more challenging figure of 450 parts per million, that doesn't guarantee saving an area like Ningaloo reef in Western Australia.

Business is likely to be more pleased. A starting price of $20 per tonne for carbon permits is in the mid-range of what has been discussed.

While a lot of focus has been on how the industries which are high emitters but also exposed to international competition, the trade exposed industries are going to be affected and compensated.

Professor Garnaut has pointed that if there is an international agreement, that policy challenge disappears because the playing field levels somewhat.

If all countries have a similar target and carbon costs, then there is no benefit in moving offshore to take advantage of lower costs in other countries.

Now the Government will study this report.

It has it's own modelling from Treasury to come and one more report from Professor Garnaut due at the end of this month.

That report will look at the challenges of adapting to climate change, and the economic impact of that challenge.

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