Garnaut

The Age, July 3, 2008

Ross Garnaut releases the much anticipated draft of his final report tomorrow. Adam Morton tells you what to expect and what it all means.

HERE is what we have learned so far this week: when it comes to carbon trading people are running blind. Australians want an emissions trading scheme, even though they don't know what it is. According to a poll by Essential Research, 93% say they know little or nothing about what will be the biggest change to the economy in at least a generation. But nearly three-quarters think it sounds like a good idea.

In much the same way, it seems people want to hear from veteran economist Ross Garnaut - the Government's handpicked adviser on climate change - despite it being unclear whether what he says will have significant sway with cabinet.

From being painted last year as the Labor Party's torchbearer on the road to a carbon-free society, he is now described as an "input". The Government says it will listen, but is not committed to following any of what he recommends.

Climate Change Minister Penny Wong seemed to take a further step away from Garnaut this week, telling ABC radio that she couldn't reveal anything about his upcoming report except that it was independent - not the Government's - and "from memory" was being released tomorrow. .

Despite many of Australia's most influential people - business leaders, bureaucrats, and presumably cabinet ministers - counting down the days until its release, Wong seemed decidedly disinterested.

So what exactly is Garnaut releasing tomorrow?

The report to be launched at the National Press Club on Friday maybe a draft, but at 600 pages, it's one hell of a draft. It will give the first overarching insight into the Garnaut Review's assessment of how climate change will affect the Australian economy, and what we can do about it. Earlier reports have just been snapshots of his thinking; this is a sketch of the full thesis. It is understood to include his first look at what we can do to adapt, including the fairest way to spread costs across households and regions. What it won't contain is any recommendations of emissions targets - the amount Australia should be cutting its emissions in the medium (2020) and long (2050) term.

Treasury modelling of the economic impact of different sized emissions cuts is extraordinarily complicated, and has taken longer than first estimated. The modelling is due in August, and will be included in Garnaut's final report to be released by September 30.

What will it say?

First, that climate change is happening much, much faster than was understood when former World Bank chief economist Lord Nicholas Stern (2006) and the Nobel Prize-winning Intergovernmental Panel on Climate Change (2007) released their landmark warnings that, along with Al Gore's An Inconvenient Truth, thrust the issue in the public eye. An academic paper that Garnaut co-wrote in April found that by 2030 greenhouse emissions are expected to be 14% worse than the IPCC's worst-case scenario last year.

Can it be stopped before the danger to the climate is irreversible?

Garnaut says yes, but has implied on several occasions he doesn't think it is likely. Even stabilising atmospheric carbon dioxide at 550 parts per million - a level that climate scientists agree gives virtually no chance of staving off a two degree rise in temperature, the benchmark that dramatically boosts the chance of catastrophic ecological and economic change - is nigh impossible, Garnaut says in his February interim report, unless we get an "urgent, large and effective global policy change". Stabilising at the most commonly cited target to avert disaster - 450 parts per million - would require global emissions peaking about 2010 and falling to less than half that by mid-century.

With dirty-powered growth in the developing world continuing to soar, turning things around so quickly is a monumental ask. China - now the world's largest emitter - is said to be building a new coal-fired power station a week. After falling in the 1990s, carbon intensity - the amount of greenhouse released per unit of GDP - has actually risen this century. Garnaut says we want to "decouple" the economy from carbon. Right now, we are headed in the wrong direction. Tomorrow's report will have modelling of the impacts on Australia of stabilising at both 450 and 550 parts per million. Garnaut says there was not time to model at the lower, safer target of 400 - a point that has drawn sharp criticism from the environmental lobby, who argue this is effectively conceding we cannot avoid climate disaster.

Remind me again - Australia is responsible for about 1% of global emissions. Why should we be hurting ourselves while much bigger emitters do nothing?

In a nutshell, because Australia is one of the world's biggest per capita emitters and is at greater risk from climate change than most other countries. Worst case-scenarios outlined in Garnaut's interim report in February included up to 90% loss of habitat for Victorian vertebrate species; widespread relocation of coastal settlements and infrastructure due to rising sea levels; up to 80% of Kakadu's freshwater wetlands lost; all of the Great Barrier Reef bleached; and the southward spread of dengue fever as far as Brisbane. Garnaut says much more work is needed to see exactly what the impact on Australia would be. There has been far less research here than in the northern hemisphere.

By bringing in tough anti-climate change measures, and taking a lead in global negotiations, Garnaut says Australia will be saving itself. Part of this will involve offering developing countries help in return for setting emission reduction targets of their own. Lord Stern said it and Garnaut agrees: the cost of not tackling climate change will ultimately be a lot more than doing a little to tackle it now.

Garnaut does not advocate Australia making massive cuts regardless of what happens elsewhere in the world. His emissions trading paper released in March called on the Government to set a series of trajectories beyond 2012 - a relatively strong path to start with, to be replaced by tougher targets once there is a global treaty. If, against the odds, next year's UN meeting in Copenhagen were to agree to emission limits being decided on a per capita basis, that could be as much as 90% by 2050 - much higher than the Rudd Government's current target of 60%.

Europe has already taken this approach - a target of cutting emissions by 20% by 2020 to be lifted to 30% under an international agreement.

While climate change is a uniquely global challenge, Garnaut says it won't be solved through one big post-Kyoto treaty. It will require countries going it alone and making regional commitments, such as Australia's pact to trade permits with Papua New Guinea. But all these small steps must be made with the global perspective in mind.

So, emissions trading. What is it?

Like the Government, Garnaut says carbon trading is the most important plank of Australia's plan to deal with climate change. To date, he has taken a hard line compared with the Government and Opposition, but has tempered his view a little in light of the extraordinary recent surge in oil prices.

An emissions trading scheme is effectively a greenhouse cap. Under Garnaut's approach, the cap would be carved into carbon permits that would be auctioned off to business, allowing them to pollute. Permits could be banked and borrowed - effectively allowing business to emit now and pay later, or vice-versa.

There would be no free permits for power generators, despite intense lobbying from power generators that denying them compensation will risk multibillion-dollar losses and potential interruptions to electricity supply - especially in brown-coal rich Victoria. Garnaut says the scheme must not be captured by vested interests. He has no friends in the power sector, who argue his position might be fine from a theoretical point of view, but is unrealistic in practice.

The major exception on permits under Garnaut's vision would be energy-intensive industries reliant on trade: aluminium, steel and cement.

Should petrol be included?

Garnaut says petrol should be included, and as soon as possible so should forestry and its capacity to allow offsets. Petrol and electricity prices will go up. This is the point - charging more for carbon-related goods will force people to use less, and find non-polluting solutions.

Garnaut has recently softened his stance on how quickly this needs to be forced through. Speaking early last month, he said record oil prices were already doing the work of an emissions trading scheme - pushing fuel prices through the roof and discouraging people from driving. He now proposes starting with a relatively low carbon price, set by the Government, for the first two years of the scheme after it starts in 2010. This would allow the country time to adjust and check that the scheme is working. This, in part, is allowed by Australia's incredibly good deal under the Kyoto Protocol. We are on target to meet our goal of an 8% emissions rise between 1990 and 2012, allowing a gentler start to emissions trading without global penalty if we decide to take that path.

Ultimately, Garnaut says our emissions trading scheme should be linked with compatible schemes to allow deeper, cheaper emissions cuts through offsets.

The Government must be making a lot of money. What should they do with it all?

Modelling by the Climate Institute says the Government could eventually reap as much as $20 billion a year from emissions trading. What Garnaut says on how this should be spent seems a moot point - Treasurer Wayne Swan has already committed to spending every cent on households.

But the Garnaut Review has suggested it should be divided between a larger number of groups. Candidates for help include: poor households needing help coping with price rises; communities built around the coal industry, such as Gippsland's Latrobe Valley and the Hunter Valley in NSW; research and development in clean energy technology; energy infrastructure to connect new developments to the main grid; public transport; helping cut emissions offshore; and heavy-polluting, trade-exposed industries.

What about the holy grail of climate change, "clean coal". Is it a solution?

Garnaut says yes, and says it a lot more enthusiastically than most. He believes carbon capture and storage - taking the carbon dioxide emitted by power stations and pumping it under ground - can be commercially viable by 2020. And he argues Gippsland is exceptionally well placed to benefit, with an extraordinary number of sites suitable for gas storage in the Latrobe Valley and Bass Strait. He foresees a major high-tech industry, perhaps also storing carbon dioxide produced in other parts of Australia. With the developing world building so much dirty power generation, Garnaut also argues Australia should play a part in finding a solution that can be exported.

Do we need a mandatory renewable energy target, as backed by the Government?

Despite Wong yesterday pledging to push ahead with a target of one-fifth of energy coming from green sources by 2020, Garnaut has argued it is incompatible with an emissions trading market, and will need to be phased out.

Adam Morton is environment reporter.