One little word undoes the PM's claims on greenhouse gases

• Tim Colebatch
• The Age, December 23, 2008
• http://www.theage.com.au/opinion/one-little-word-undoes-the-pms-claims-on-greenhouse-gases-20081222-73km.html?page=-1

WE ALL think the Rudd Government's emissions trading scheme will cut Australia's greenhouse gas emissions by 5 per cent relative to 2000 levels — right? No, we're wrong.

Treasury modelling estimates that even with a cleaner, more effective model than the one now adopted, Australia's emissions in 2020 would rise 5.8 per cent above 2000 levels. We would pump out more emissions in 2020 than we do now.

It's an ugly reality that exemplifies why the Government's model is doomed to fail. It promises change, but tries to shield everyone from all the points that drive change.

As I have argued before, the problem is not the targets themselves. If we were to cut our emissions in 2020 to 5 per cent below 2000 levels, that would be a rapid cut of 25 per cent in emissions per capita from current levels. A cut to 15 per cent below 2000 levels, promised if we get a good international agreement, implies a cut of 33 per cent per capita between 2006 and 2020. If we achieved that, it would be real progress towards the ultimate goal of halving global emissions.

The problem is that with Rudd's decision to shield companies and households from the changes the scheme is meant to drive, it's unlikely that Australia will reduce its emissions. Yet that is what he promised to do.

There's a crucial point we all overlooked. Labor has not committed Australia to cut its emissions by 5 per cent, but to cut its emissions allocation by 5 per cent. And that is very different. In 2000, Australia emitted 553 million tonnes of greenhouse gases. In 2020, the Government will allocate permits for 525 million tonnes of emissions. But even before last week's changes weakened the scheme, Treasury estimated that Australia would emit 585 million tonnes.

The key to it is that the scheme allows companies to use unlimited numbers of permits from other countries instead of our own. And the permits we import will be subtracted from our emissions tally.

They would come from other Western countries or (more likely) from developing countries, under rules such as the Kyoto Protocol's clean development mechanism (CDM), which allows Western companies to buy permits for emissions saved in developing countries by using cleaner technology. A noble idea, unfortunately it has proved easy to rort.

The Garnaut report proposed a tighter test, but the Government refused. Permits from CDM and "joint initiative" projects in countries with emission reduction targets are expected to be plentiful and cheap. That's why Treasury estimates that emissions trading will prove cheap.

On Treasury modelling, even with constraints that will no longer apply, Australia in 2020 would import permits for another 46 million tonnes from other countries. And by 2050, Rudd pledges, Australia will reduce emissions by 60 per cent from 2000 levels, to 221 million tonnes. But Treasury projects that in fact Australia would cut its emissions by only 24 per cent, to 420 million tonnes, and buy 199 million tonnes of permits overseas.

Moreover, its modelling assumed Labor would limit the use of foreign permits, to supply at most half the cut in emissions. But Rudd threw out that constraint, allowing an even larger share of our "emissions cuts" to be bought overseas.

What's wrong with that? Nothing, so long as it really cuts emissions. But we have seen China sell "certified emissions reduction" permits for phasing out hydrochlorofluorocarbons, which it has to do anyway under the Montreal Protocol. The ease of rorting is one reason why economists such as Jeffrey Sachs plead instead for a carbon tax.

The Government's spurned climate change adviser Ross Garnaut spelt out eloquently in Saturday's Age how its scheme would waste the revenue from emissions trading in unjustifiable and/or extravagant compensation payouts to interest groups, rather than using it to drive change. It's a sad picture of a weak Government that crumbles under pressure from big business.

The net effect will be to reduce emission cuts in Australia, so the targets are achieved by buying dubious overseas permits. The scheme won't be a write-off, but it will be rorted, and it will not achieve what it claims to do.

Labor has tried to deflect criticism by focusing on the cuts in per capita emissions. That would be fine if the cuts really happened, and if, like Garnaut, it proposed that contraction and convergence to a global per capita emissions target by 2050 be the framework for an international agreement.

But when Penny Wong addressed other environment ministers at Poznan, she did not mention per capita emissions. Why? Because Australia's per capita emissions are the sixth highest in the world — and under Garnaut's framework we would have to make (or buy) the sixth biggest cuts.

Yet there is no other viable way for the world to cut emissions to levels that would end global warming. The greenhouse gases that threaten environmental catastrophe are not those already up there, but the far greater volume to be emitted in future, mostly from developing countries.

We need real leadership — not this.

Tim Colebatch is economics editor.