Third World to do our dirty work

• Tim Colebatch and Adam Morton
• The Age, October 31, 2008
• http://www.theage.com.au/national/third-world-to-do-our-dirty-work-20081030-5enq.html?page=-1

AUSTRALIA plans to minimise the cost of tackling climate change by paying developing countries such as Indonesia to cut their greenhouse emissions, long-awaited modelling by Treasury shows.

The modelling, released yesterday, gives the Federal Government an economic green light to push on with emissions trading and start cutting greenhouse gas emissions from 2010.

But detailed figures in the study make it clear that meeting our emission targets will be cheap because, among other things, we will buy half or more of our emission permits from other countries.

While Prime Minister Kevin Rudd has pledged a 60% cut in emissions by 2050, the modelling shows Australia could technically fulfil the pledge with a cut in its emissions of just 24%, relative to 1990 levels. The other 36% would be made up by the purchase of emission permits from developing countries.

The modelling assumes a heavy trade in permits, with China, India, Indonesia and other developing countries selling surplus emission permits to rich countries. The poorer countries would gain their permits largely by conserving forests from large-scale clearing.

Australia's actual emissions, on this scenario, would fall only from 554 million tonnes in 1990 to 420 million in 2050. Carbon capture and storage technology would allow coal exports to keep expanding, while emissions from transport and agriculture would each grow by almost 50%.

The modelling found that:

* Tackling climate change will have a minimal impact on Australia's future prosperity, cutting the average growth rate in per capita output between 2010 and 2050 from 1.2% to 1.1%.

* Households will pay $1 a day in higher gas and electricity charges when emissions trading begins in 2010. Pensioners and single-parent families will face the biggest rise in living costs, 1.3%, but will be compensated.

* It would cost no more to cut emissions deeply by 2020, as proposed by Canberra's climate adviser, Professor Ross Garnaut, than to take a more gradual approach, as proposed by the Government's green paper.

* Delaying action, as urged by the Coalition, would increase the ultimate cost by encouraging investment in energy-intensive technology that would be a burden in the long run. To put off tackling emissions until 2017 would increase the cost of doing so by 10%.

* Virtually no industries are likely to move overseas because of Australia taking early action. The aluminium sector will eventually shift overseas, but only because countries with abundant renewable energy will have cheaper electricity.

Treasurer Wayne Swan hailed the report as "a rigorous piece of work" that showed Australia could tackle climate change at the same time as boosting growth and jobs.

But the Coalition attacked the modelling for not factoring in the global financial crisis.

Opposition Leader Malcolm Turnbull said it also had two other shortcomings: it failed to take into account a scenario where the rest of the world did not cut emissions, and it did not examine the cost of abatement through solar and wind power and developing carbon capture and storage. He maintained his call for a delay until 2011 or 2012.

Coalition emissions trading spokesman Andrew Robb said he suspected the Government was "withholding the real impact of the biggest financial meltdown since the Great Depression to help them blunt growing apprehension about their rush to impose their emissions trading scheme".

Greens climate change spokeswoman Christine Milne accused Treasury of making pessimistic assumptions about renewable energy and energy efficiency, but said the modelling still backed its call for fast and early emission cuts.

But Minerals Council of Australia chief executive Mitch Hooke said the modelling was unrealistic, massively underestimating the cost of changes to the electricity sector and developing carbon capture and storage technology.

The Business Council of Australia reacted cautiously, but noted that the Treasury modelling stressed the importance of achieving a global climate deal and had not examined the impact on individual companies.

Environmental lobby groups said the modelling left the Government with no excuse not to set a strong emissions reduction for 2020.