The Australian today has an article that reports electricity prices will increase by around 37% with the introdroduction of the less ambitious 550 ppm CO2 target (recommended by Garnaut)

THE cost to Australian households would be almost identical under the ambitious and the less ambitious global emission reduction scenarios investigated by Ross Garnaut, Treasury modelling in the final report reveals.

Conservationists seized on the results to argue that the Government should push for a more ambitious scheme, which provided a far higher chance of maintaining the productive capacity of the Murray-Darling Basin and the ecology of the Great Barrier Reef. The Garnaut report revealed that an average weekly income of $702 could be expected to rise to $820 by 2020 in the absence of any domestic carbon emissions trading regime. Under a scheme aligned to an ambitious global target of stabilising carbon emissions in the atmosphere at 450 parts of CO2 per million, that average household income would rise to $808. Under a less ambitious scheme targeting 550 parts of CO2 per million, it would rise to $811 a week.

According to the chief executive of the Climate Institute, John Connor, that $3 a week in household income is a small price to pay for the massive environmental benefits afforded by the tougher target. Professor Garnaut agrees, but yesterday he repeated his view that global leaders may not be able to clinch the tougher deal when they meet in Copenhagen at the end of next year. “Remember, according to Garnaut, under 550ppm we lose the reef as we know it and the economic viability of the Murray Darling for want of an extra $3 per week of income and the other price impacts,” Mr Connor said.

The biggest price impact shown in the modelling is on electricity bills, which are expected to rise by 37 per cent more than they otherwise would have under the ambitious scenario — or about $8 a week extra on the average bill. Under the less ambitious scenario, power bills would be 21 per cent more than they would without an emissions trading scheme. The modelling found that a scheme starting with a carbon price of $20 a tonne would lead to a one-off rise in inflation of about 1 per cent, but further inflationary pressures could be mitigated by providing compensation to low- and middle-income households. It predicted that Australian agricultural production could be reduced by 20 per cent in the absence of any action to reduce global warming, including the loss of half of the output of the Murray-Darling Basin by mid-century and all of its production by the end of the century.

Mining would also be badly affected, losing 13 per cent of its output by the century’s end. But if the world does act to reduce climate change, Australian agriculture and forestry would be among the biggest winners and mining output would improve over time, the review states. The same team of Treasury and external consultants did slightly different modelling for Professor Garnaut and the Rudd Government. The Government will release its modelling next month before finalising its emissions trading scheme by the end of the year.

An article in SMH today reports on scientists pushing Rudd to set CO2 reduction target at 25%, not 10% as recommended by Garnaut.

An Australian scientist who led the United Nations ‘ investigation of climate change has joined 15 of his colleagues in urging Prime Minister Kevin Rudd to cut carbon emissions by 25 per cent.

Roger Jones co-authored the Intergovernment Panel on Climate Change’s (IPCC) fourth assessment and he has signed a letter to Mr Rudd, Climate Change Minister Penny Wong and Environment Minister Peter Garrett .

“The 2007 IPCC report … has unequivocally concluded that our climate is warming rapidly, and that we are now at least 90 per cent certain that this is primarily due to human activities,” the letter says.

The scientists say if the government does not legislate to cut emissions by 25 per cent of 1990 levels by 2020 then it “will leave Australians with a legacy of economic, environmental, social and health costs that will dwarf the scale of national investment required to address this fundamental problem”.

The letter appears designed to pressure Senator Wong as she prepares to receive climate change adviser Ross Garnaut’s final report on the issue on Tuesday.

Mr Garnaut earlier this month recommended Australia cut emissions only by 10 per cent by 2020.

“Other nations have taken action and have committed to further action,” the concerned scientists wrote in their letter.

“We urge you to act decisively to maintain global momentum and to protect Australia’s future.”

Other signatories to the letter include the former chair of the joint scientific committee of the world climate research program (WCRP) John Church and his WCRP colleague Ann Henderson-Sellers.

Meanwhile, a Newspoll has shown that Australians want the government to invest profits from an emissions trading scheme (ETS) in renewable energy not the coal industry.

The poll, commissioned by Greenpeace Australia, found 84 per cent of respondents didn’t want profits to be used to compensate the coal industry.

And just 10 per cent think coal-fired power generators should be compensated under the scheme.

Greenpeace spokeswoman Trish Harrup called on the federal government to amend its proposed scheme.

“Where is the investment in renewable energy Australians want to see?” she asked in a statement.

“The federal government’s carbon pollution reduction scheme should be designed to do just that, not pay wealthy and polluting power companies to continue to pump carbon into the atmosphere.”

Greenpeace says coal-fired power generators stand to gain cash compensation of around $1.2 billion under the proposed ETS.

Two articles appeared in AFR today questioning the direction we are heading. One article suggested that the CO2 capture and storage route (Clean Coal) used up too much energy in getting electricity to market. Rather, it suggested we should be considering using another technology that combines pulverised coal with water and burns it with compressed air. This would be similar to diesel. The size of plant required would be small but the power station could be situated much closer to the cities and the coal could be transported to the site (rather than positioning the power station at the coal mine); This would increase efficiency from around 30% to 46%.  The scientist at CSIRO behind this idea is Louis Wibberley and further information can be found at http://www.csiro.au/resources/LowEmissionEnergyGenerationFromCoal.html

 The other article in the AFR questioned the merits of cap and trade system for reducing CO2. Kevin Davis, Chair of Finance at University of Melbourne suggested a simple carbon tax would do the job with revenue being ploughed back into the industries that paid the tax (rewarding low emitters);

THE Federal Government has refused to commit itself to any of the pollution reduction models outlined by its handpicked climate change expert, Ross Garnaut, saying it will make its own decisions by the end of the year.

However, the Climate Change Minister, Penny Wong, hinted that the Government was leaning towards one option canvassed by Professor Garnaut which provided the least political pain.

The option, which would result in a 5 per cent reduction of emissions by 2020, outraged environmental groups.

The Greens warned of trouble before the Senate for the Government’s emissions trading scheme should the 2020 target not be more ambitious.

In a report released yesterday, Professor Garnaut said the most practical scenario was for Australia to reduce its emissions by 10 per cent by 2020, leading to an 80 per cent reduction by 2050.

However, this would require a global agreement at the international climate change conference in Copenhagen next year and Professor Garnaut was not confident this would occur.

In the event of failure in Copenhagen, he said, Australia “should still play a substantial role” in “keeping the chance of a global agreement alive” and commit to reducing greenhouse gas emissions by 5 per cent by 2020.

This would equate to a 60 per cent reduction by 2050, he said.

The Government will set its own 2020 target by the end of the year but has already promised a 60 per cent reduction by 2050 and Senator Wong said yesterday that would not change.

“We’ve been very clear that our commitment is to a 60 per cent reduction by 2050 and I think what Professor Garnaut’s report today confirms is that is a significant target,” she said.

Environmental groups were quick to slam both the 10 per cent and 5 per cent models as grossly inadequate.

“The best way for Australia to encourage other countries to reduce their carbon pollution is for us to lead by example and set strong targets to reduce our own,” said Don Henry of the Australian Conservation Foundation. He said cutting emissions by 30 per cent by 2020 was affordable and would cost families less than $1 a day.

The Greens want a 40 per cent reduction by 2020 and said the 5 per cent and 10 per cent reduction models were “laughable”.

The Opposition Leader, Brendan Nelson, declined to nominate his 2020 target. He is resisting any meaningful scheme until the world’s big polluters agree to act, and says any scheme Labor introduces should have a negligible impact on consumers.

With smoke in our eyes, we can’t see the fog September 6, 2008 Ross Garnaut, the Government’s independent climate change adviser, recently posed a highly disturbing question. Is solving climate change too hard? The daily debate in Australia and around the world made one think so, the economics professor wrote in July. “It is too complex. The special interests are too numerous, powerful and intense.”With his latest report yesterday, Garnaut’s pessimism is evident. He says the world and Australia will risk “catastrophic consequences” to the natural environment, including the extinction of a third of the world’s species, if we allow the planet’s temperature to rise by 3 degrees over the next century.Yet, in a disturbing conclusion, Garnaut says he does not believe the majority of countries and their vested interests are ready to heed this warning. And so he recommends that Australia should pursue, for now, a global agreement that almost certainly, according to his best scientific advice, risks the very catastrophic consequences he has so painstakingly outlined.According to Garnaut’s report, the science goes like this: if the world can stabilise greenhouse gas emissions at 450 parts per million in the atmosphere, we might be able to keep the temperature rise to about 2 degrees to 2.5 degrees by the end of the century. If we go to 550 parts per million, we are likely to push the temperature rise above 3 degrees, possibly as early as this century.At that temperature, we risk “catastrophic consequences”. The Great Barrier Reef would be destroyed, along with most of Kakadu and a fifth of the Murray-Darling farmland. Far more disturbing is the real possibility the Greenland ice sheet will melt along with many of the world’s glaciers, leading to sea level rises that would affect the 80 per cent of Australians living on coastal plains, and wiping out millions of homes in China, India and South-East Asia.Garnaut knows the science well. He forcefully argued that it is in Australia’s interests to pursue a goal of keeping the global temperature rise at 2 degrees or less. He patiently explains that the cost of Australia’s fair share of financial burden would be less than 1 per cent of our national economy.But he does not recommend Australia fights for this now. Why? Because Garnaut judges the rest of the world won’t. “Is the international community ready to commit itself to such a strong outcome? Not yet,” he says. It may be possible in the future.

To keep hope alive, Garnaut argues that Australia should aim “as soon as possible” for the more ambitious goal and express its willingness to pay that price. But for now, the best we can get is an agreement to stabilise global emissions at the dangerous level of 550 parts per million.

The immediate consequence of Garnaut’s findings is that Australia is being asked to pursue an outcome that very few mainstream climate scientists will support. More immediately, it would mean cutting greenhouse gas emissions by just 10 per cent by 2020, and by 80 per cent by 2050. These targets, Garnaut admits, “will not be the best for all time. They are the best available to us now.”

This is despite Japan deciding to pursue tough targets, the European Union setting 20 per cent as a minimum target for 2020 and the main US presidential candidates promising deep cuts there.

But Garnaut argues: “The developed countries are yet to demonstrate their seriousness about such a commitment and in any case cannot alone deliver such an outcome in the Platinum Age. Substantial reductions in emissions below business-as-usual in developing countries would also be required and constraints in the order of what is required are not likely to be accepted over the next few years.”

Garnaut’s recommendations will create a political crisis for the Climate Change Minister, Penny Wong, and the Prime Minister, Kevin Rudd. Garnaut’s 10 per cent target for 2020 and his recommendation to pursue a weaker outcome in the short term at the United Nations talks will set us apart from the EU. At the UN climate talks at Bali, developed countries including Australia undertook to examine cuts of between 25 per cent and 40 per cent.

In December, Wong must return to the UN climate talks. If she offers a 10 per cent target, environmental leaders say, Australia’s negotiating strength is likely to be severely undermined.

“If we want to get the best possible outcome at the global talks, we have to break from the pack and be a real leader,” Tony Mohr from the Australian Conservation Foundation said. “If we keep playing follow-the-average - not even follow-the-leader - we won’t get an outcome that will save the Great Barrier Reef.”

Wong argued with business leaders last week that Australia had to take on credible targets if it wanted to influence the UN talks. Speaking to Australian manufacturers, she put her dilemma bluntly. “If we are going to get the global action we need, we will have to act at home. We cannot expect to influence the shape of a new international agreement if we cannot demonstrate that we are also taking responsibility here.”

Wong said the Government would not set a 2020 target until it received advice next month from the Treasury. But Garnaut’s 10 per cent recommendation will be used by Australian mining and energy sectors, and their political allies, to argue strongly for a lower target and a less ambitious start to action on climate change in Australia.

In the past two months an intense lobbying campaign by Australia’s major greenhouse gas polluters has already threatened to gut the Rudd Government’s climate change plans. From Don Voelte, the head of Woodside, to Don Argus, chairman of BHP Billiton, the nation’s heavy hitters have taken aim at plans to put a price on greenhouse gas emissions and push Australia to produce 20 per cent of its power from renewable sources by 2020.

The lobbying campaign climaxed with a report from the Business Council of Australia under its new head, Greig Gailey. The report, released a fortnight ago, argued that under the Government’s plans for a carbon pollution reduction scheme, three businesses, which were not named, would have to shut immediately, four would have to “fundamentally review” operations and several would have to take immediate action to reduce costs. “Many potential investments will not take place,” Gailey said.

While arguing strenuously that it supported Rudd’s scheme, the Business Council report suggested changes that would seriously water it down. Underscoring every representation from the nation’s power generators and energy companies are two seemingly unshakeable arguments. Australia will be cutting its emissions while other big-polluting countries get a free ride and global emissions keep rising. Worse still, they say, Australia’s unique advanced economy, based on its booming mineral and energy exports, will be severely damaged.

The arguments are powerful and well-rehearsed. Indeed, they are the same arguments that were run 10 years ago when Robert Hill, John Howard’s first environment minister, tried to introduce a carbon emissions reduction scheme.

The Labor Government is now in tense negotiations with the big polluters. Wong has outlined, in her green paper on a carbon pollution reduction scheme, a program of free permits for the big emitters that face overseas competition. Australia’s coal-fired power generators, many owned by global companies, are being offered compensation to adjust. But in these weeks of “sanctioned hysteria” - as Wong’s department head, Martin Parkinson, described it - the lobbying by big polluters continues.

Garnaut’s latest report will supercharge the lobbying campaign.

Every senior Rudd minister recognises there is merit in some of the industry arguments. But the extensive research undertaken by Garnaut’s review undermines Australia’s business leadership. It paints a stark image of Australia as an energy dinosaur, hopelessly unprepared for a world forced to adjust to climate change and falling well behind other developed countries in the battle.

Among Garnaut’s bleak statistics is that the greenhouse gas emissions load in Australia’s electricity supply is 98 per cent higher than in the average developed OECD country. That puts us just ahead of countries like Cuba, Cambodia and Kazakhstan in the production of “clean” electricity - the legacy of our reliance on black and brown coal for three-quarters of our electricity supply. Indeed, our energy supply is one of the most greenhouse-gas-intensive in the world. Only North Korea, Estonia, Mongolia, Bosnia and Poland are worse, according to Garnaut’s July report.

Confronted with these comparisons, the head of the Australian Industry Greenhouse Network, Mike Hitchens, responded: “That’s just a fact of history; we have a lot of coal.”

But, as Garnaut reveals, it is not a fact of history. Less than two decades ago, our greenhouse profile looked pretty similar to the average OECD country. But when other advanced countries turned away from coal to cleaner fuels, Australia embraced it as a cheap energy source, especially for aluminium smelting.

Today, Australia’s biggest-emitting industries are agriculture and aluminium production. If our electricity supply was not dominated by coal-fired power stations, our emissions would not be greater than most advanced countries.

But Australian business and political leaders have fought hard to preserve this very cheap power over the past decade as the scientific warnings on climate change grew more urgent.

From 1990 to 2005, Australia’s emissions from energy leapt 36 per cent. The failure by politicians and businesses to grasp the significance of climate change means that Australia’s greenhouse gas emissions per head are now higher than nearly every country in the world except for the Arab oil sheikdoms of Bahrain, Kuwait and Qatar, and two others - the impoverished oil producer Bolivia, and Brunei to our north.

This legacy of policy failure now confronts Wong, whose challenge is twofold. Not only must she persuade industry that transformation of Australia’s energy supply serves its interests, she must make Australia’s greenhouse reduction targets credible to the international community.

Without the latter, Australia has small chance of using its limited influence to get the outcome Garnaut most hopes for - a global agreement to reduce greenhouse gases that avoids the risk of catastrophic consequences. This is also the agreement business says it wants: one that will help create a level playing field by imposing limits on all big polluters, including the US, China and India.

No one, especially Garnaut, believes Australia’s emissions cuts alone will save the planet. But Australia’s efforts, explains Garnaut, are “our contribution to keeping alive the possibility of an effective global agreement”.

Without that global agreement, Australia’s long-term future is grim. Modelling by CSIRO, the Bureau of Meteorology and the UN’s scientific body predict a collapse in Australia’s food bowl, the Murray-Darling, unless there is global co-operation to keep the world’s temperature from rising more than 2 degrees over the next century.

Just as importantly, Garnaut explains, unless we avoid the worst of climate change, the Asian commodity markets that Australian business leaders insist they are trying to preserve will evaporate.

“The decline in Australia’s overall terms of trade as a result of climate change damage will be driven primarily by falls in the prices received for coal, other minerals and agricultural products,” Garnaut reports.

Australia has hugely benefited from the major emitting economies of the developing world, Garnaut reminds us. “The line between our own prosperity and the increase in greenhouse gas emissions in Asian developing countries is rather more direct that the general terms of trade effects would suggest,” he says. “Fossil fuels have been a major component of increased Australian exports through the Asian boom of the early 21st century.”

Garnaut asks in this report whether it is worth Australia paying less that 1 per cent of its gross national product through the 21st century to avoid the risk of catastrophic climate change.

He judges that it is. But he does not believe the rest of the world will accept that price.

This story was found at: http://www.smh.com.au/articles/2008/09/05/1220121526788.html

  Practical but diabolical: Australia’s climate change goalMarian Wilkinson Environment Reporter September 6, 2008 THE head of the Government’s climate change review is unlikely to have his latest recommendations endorsed by many mainstream climate scientists.His own report explains why. Ross Garnaut is arguing that, right now, Australia should support an agreement at the UN climate talks that, in his own words, will risk the melting of the Greenland ice sheet, the extinction of a third of the world’s species and the collapse of the Great Barrier Reef.Why is Professor Garnaut recommending this course? Because he believes the world is not yet ready to sign an agreement that will cut greenhouse gas emissions enough to avoid catastrophic climate change.“The only option for Australia at this time is to pursue global agreement to stabilise atmospheric greenhouse gas concentrations at 550ppm [parts per million],” he concludes.What does the figure 550ppm really mean? That is the level of greenhouse gas concentrations that Professor Garnaut agrees will risk the catastrophic consequences. It means pushing up the planet’s temperature by about 3 degrees possibly within the next century. But Professor Garnaut believes that figure is the best that can be achieved by the world now.At the UN climate talks in Bali just nine months ago, the leaders of the European Union fought an uphill battle demanding that any new global climate agreement must be aimed at stabilising greenhouse gas concentrations at 450 parts per million. That figure is guided by the UN’s best scientific advice and aims to keep the temperature rise to about 2degrees, to avoid the risk of dangerous climate change.

This story was found at: http://www.smh.com.au/articles/2008/09/05/1220121526731.html Garnaut pushes low-key   Lenore Taylor, National correspondent | September 06, 2008 KEVIN Rudd’s climate change adviser, Ross Garnaut, has opened the way for the Government to adopt a modest greenhouse gas reduction target in a report that has won cautious business support and outraged environmentalists.Releasing his latest report yesterday, Professor Garnaut recommended Australia set a low initial greenhouse gas reduction target of between 5 and 10per cent by 2020. The finding is likely to form the basis of the Rudd Government’s political compromise on climate change. In controversial recommendations, Professor Garnaut has proposed that Australia only agree to bigger domestic reductions inside a much tougher international deal and that it set a fixed price of $20 a tonne for carbon in the first two years of its emissions trading scheme, between 2010 and 2012. The long-awaited Treasury modelling partly unveiled in Professor Garnaut’s interim report yesterday revealed that a 10per cent cut - within a global agreement - would come at a surprisingly low cost for Australia, about 0.1 per cent of GDP a year or a 1.1 per cent reduction in growth by 2020. It would result in a carbon price of about $34.50 by 2020 and push up household electricity prices by 40 per cent over that period, although Professor Garnaut pointed out the Government’s intention to compensate low- and middle-income households for the increased costs they would be forced tobear.

Business groups generally welcomed Professor Garnaut’s support for a modest emissions reduction goal linked to the success of international talks.

But conservationists were horrified by Professor Garnaut’s assessment that the only achievable global goal in the short term was to stabilise emissions at a level that could destroy the Great Barrier Reef and the economy of the Murray-Darling Basin.

Professor Garnaut defended his proposed “first stage” target of stabilising carbon in the atmosphere at 550 parts per million, saying it was his “reluctant conclusion that a more ambitious international agreement is not possible at this time”.

“My aim is to nurture the slender chance that humanity can get its act together,” Professor Garnaut told the National Press Club yesterday.

He proposed that if this goal was agreed, emissions should be allocated between countries in a way that would require Australia to reduce its carbon pollution by 10 per cent of 2000 levels by 2020 - a far lower goal than the 25 to 40 per cent target range agreed by many developed nations, but not Australia, at the UN Bali meeting last year.

This pathway would lead to 80 per cent cuts by 2050.
But Professor Garnaut said that if next year’s critical UN negotiations at Copenhagen secured only a partial agreement, Australia should agree to just a 5per cent cut by 2020 - a commitment that would reduce GDP by more and push the carbon price up to $52 by 2020 because of the increased costs of working in a piecemeal international market.

This path would lead to a 60 per cent cut by 2050, which is what the Rudd Government has promised it will achieve.

In the unlikely event that international talks fall apart, Professor Garnaut proposed that Australia continue with its fixed price on carbon, increasing it annually by about 4 per cent. On the other hand, if the world agreed to a global scenario of stabilising emissions at 450 parts per million, Australia should pledge a 25 per cent cut in emissions by 2020, Professor Garnaut said.

Climate Change Minister Penny Wong said only that the Government would “take Professor Garnaut’s report into account”. Privately, however, government sources said the analysis could form the framework of an emissions trading scheme built around relatively modest targets.

But the Government will continue to reject Professor Garnaut’s advice that the carbon price flows through to petrol from the start of the scheme in 2010, and his insistence that electricity generators deserve no compensation for declining asset values.

Professor Garnaut’s modelling would see other developed countries take on far higher emission reduction goals than Australia, in recognition of Australia’s increasing population. But he insisted his plan would enhance rather than sully Australia’s international standing.

“Naturally the question crossed my mind … I had a long conversation yesterday afternoon with (British climate change adviser) Nick Stern and he supports my judgment that when you look at it in an appropriate framework, that it will look all right,” Professor Garnaut said.

But conservation groups insisted Professor Garnaut’s suggestions would be rejected out of hand internationally.

“Accepting the recommended 2020 targets of 5 or 10per cent reductions would strip Australia of international credibility,” said Climate Institute chief John Connor.

“It is a prematurely bleak and defeatist view from the Garnaut review and appears to overlook the fact that Australia can be a very influential player in global negotiations.”

Business groups welcomed the suggestion of a soft start to an emissions trading regime, which is what they have been advocating. Australian Chamber of Commerce and Industry director of industry policy and economics Greg Evans said the move to 10 per cent interim emissions target nominated by Professor Garnaut was “much closer to the ballpark than some of the previous discussions”.

“I’m not going to tick off any particular number but that’s the sort of scope that Australian business has indeed been looking at in terms of modelling outcomes,” he said.

Australian Industry Group chief executive Heather Ridout agreed that Australia’s emissions reduction trajectory should be calibrated to reflect the state of international negotiations. “We cannot afford to move too far ahead of the rest of the world,” she said.

Professor Garnaut was adamant that Australia could play a critical role in international negotiations. “Australia matters. What we do matters. When we do it matters. It would be really silly to take action with costs to ourselves meant to assist the emergence of a good international agreement, but to do it too late to have a chance of avoiding high risks of dangerous climate change.”

Additional reporting: Siobhain Ryan

An article in SMH today reports of Garnaut’s caution against Australia being too aggressive in emission cuts.

Garnaut to advise caution on cuts

Stephanie Peatling and Peter Hartcher
September 5, 2008

AUSTRALIA should not expose itself by adopting an aggressive greenhouse reduction target, but it should make a “proportionate” adjustment as it waits to see how the rest of the developed world reacts, the Federal Government’s top climate-change adviser will recommend today.

Professor Ross Garnaut will provide the Government with the results of econometric modelling. His report will draw on the modelling to estimate the cuts to carbon emissions needed to deal with climate change.

The Prime Minister, Kevin Rudd, said at the international climate change conference in Bali in December that he would not set emissions targets until he had Professor Garnaut’s work in hand.

“I share the premise of people who see this as a large and serious issue,” Professor Garnaut, an eminent economist, told the Herald yesterday. “The recommendations on the targets and trajectories are drawn logically from these premises.

“The costs of adjustment are proportionate to other countries, and they are manageable.” They should be based, he said, on “what’s a reasonable distribution of the overall adjustment”.

He said he and the British Government’s economic adviser on climate change, Sir Nicholas Stern, had conferred yesterday and Sir Nicholas “agrees with the technical approach to the analysis of the climate change problem” that he was pursuing.

Professor Garnaut is expected to report on four possible targets for cutting greenhouse pollution according to a range of scenarios.

He would not comment on speculation he would recommend a 2020 reduction target in the range of zero to 15 per cent of carbon emissions relative to 1990 levels. Such a range would still require great effort, because it would mean the trend that Australia’s emissions continued to grow would need to be reversed.

Professor Garnaut’s report will be based on much anticipated modelling done with the federal Treasury, the Queensland Treasury and Monash University. It is to estimate the cost of acting to avert climate change as well as the cost of not acting.

Sources familiar with the Garnaut review process told the Herald Professor Garnaut would not approve scenarios based on a “business as usual” approach or taking no action at all. The report has looked at the cost of keeping carbon dioxide and other greenhouse gases at particular levels. One level is 450 parts a million, which will take considerable effort to maintain, but which scientists say will give only a moderate chance of averting dangerous climate change. He is not believed to be in favour of acting on emissions to keep carbon dioxide at a higher level in the atmosphere - 550 parts a million.

Yesterday the body representing 60,000 Australian scientists and technologists urged the Government to stay focused on the scientific case for averting climate change.

“Global climate change is real and measurable,” the president of the Federation of Australian Scientific and Technological Societies

Press reports today contain references to a BCA report released yesterday which wants changes to the Rudd Government’s Carbon Pollution Reduction Plan and the Renewable Energy Target. Currently there are two tiers for trade categorising trade exposed industries and these determine how many carbon permits are allocated for free to emitters than must compete internationally. Initially, 20% of permits will be allocated free with the most emissions-intensive industries receibing 90% protection and the more moderate emissions-intensive industries receiving 60% free.

It is reported that a consultant commissioned by BCA (Port Jackson Partners) found that the above allocation method created an anomaly where companies who just miss the threshold on qualifying for 60% assistance suffer a significant financial penalty. PJP argue the changing economics of trade-exposed industries and the rigid definitions of which industries received certain levels of assistance will result in industries moving offshore (in the absence of a global carbon trading scheme).

According to the press, PJP has proposed two options for Government to consider: (1) The carbon price is kept at a low level of around $20 until other countries join a global carbon trading scheme or (2) have a fixed carbon price between $10 and $20. As this would be a tax rather than a cap/trade scheme, the trade exposed sector could grow without threatening the national emissions cap. Envirnomental groups would clearly not be happy with either of these approaches.

Carbon Plan a Company Killer

Lenore Taylor, National correspondent | August 22, 2008

THE nation’s peak business group has joined the growing chorus across Australian industry warning the Rudd Government that local companies will close and move offshore unless it fundamentally rethinks its proposed emissions trading scheme.

A “real world” analysis of the impact of the Government’s plans - based on 14 companies that opened their books for the Business Council of Australia - revealed that even with the Government’s proposed compensation, three firms would face a carbon cost so high they would close.

The future of a further two of the 14 companies - drawn from hard-hit sectors such as aluminium refining, cement manufacturing, petroleum refining, steel making, sugar milling and zinc and nickel refining - would be extremely bleak.

The companies, with annual revenues ranging from $90 million to more than $3 billion, revealed their confidential financial data to BCA consultants Port Jackson Partners on the basis that their identity would remain secret.

But the research shows that, on average, the companies’ pre-tax earnings would be cut by 22 per cent. The worst affected would suffer a 136 per cent reduction in earnings.

The Labor Government plans to introduce an ETS by 2010, forcing big polluters to buy permits to cover their greenhouse gas emissions.

“Our research tells us the Government’s plans would have significant and unintended consequences for business … we don’t believe the Government intended to design a scheme to achieve the outcome of businesses and jobs moving offshore, but that would be the outcome of the Government’s plans,” BCA president Greg Gailey said.

“We want to ensure that industry plays its part but that the cost is kept at a level which allows them to stay in Australia, rather than move to a less demanding jurisdiction.”

The BCA analysis follows a call from the Minerals Council of Australia this week for the Government to consider auctioning only 20 per cent of emissions permits. Also this week came warnings from the liquefied natural gas, cement and petrol refining sectors about the potential impact of the ETS.

Wayne Swan said he had “taken on board some of the criticisms” industry had made during consultation over the Government’s ETS green paper, but the Treasurer added that “at the end of the day, we’ve got to understand there is not a bottomless pit of money here”.

Climate Change Minister Penny Wong said she was “open to discussion of different methods of allocating” compensation to industry. Under its existing proposal, a handful of big emitters exposed to international competition could receive some of their permits for free.

But the BCA wants the Government to completely ditch the formula by which it proposes to compensate some companies that cannot pass on a carbon price to customers, saying it is both inadequate and unfair.

Instead, the BCA proposes a compensation formula that would be on average far more generous to its members. It says the 1000 Australian companies required to buy emission permits should be required to buy them until they had paid between 3 and 5 per cent of their gross income, after which they should receive their permits from the Government for free.

They say this would still cost the companies on average about 10 per cent of their profits, but this cost would be fixed rather than rising to “unsustainable” levels with an increasing carbon price.

The Government has been adamant that it must limit the proportion of permits given away to trade-exposed industries to 30per cent to avoid putting impossible burdens on the rest of the economy, including households, and to make sure it reaps sufficient revenue to pay compensation to families and businesses.

According to Port Jackson director Rod Sims, who undertook the research, the BCA’s alternative compensation model would meet its 30 per cent target at a carbon price of $20 a tonne.

The proportion of free permits required would rise to 44 per cent if the carbon price rose to $40 a tonne and the Government, rather than the trade-exposed companies, bore the increasing pain. But the BCA is recommending that the Government not allow the carbon price to rise to those heights until an international agreement is reached, saying it must either set a path for emissions reductions so gentle that the price is kept at between $10 and $20 a tonne, or else fix the permit price at those levels.

The Climate Institute chief executive John Connor warned the Government against succumbing to the business push for “climate protectionism”.

“Serious questions need to be raised why the Government should transfer billions of dollars of taxpayers’ revenue to businesses who have known an emissions trading scheme was coming over a decade ago,” he said.

The Australian Conservation Foundation said the BCA plan was “totally irresponsible”.

“Polluting industries that have spent the last decade doing little or nothing to prepare for a carbon-constrained economy should not get a free kick,” said executive director Don Henry.

Here is a summary of points lifted from most of the articles in the AFR Carbon Quarterly

Carbon Press Review

AFR
Quarterly 20 Aug 2008
(summary of some articles):

* Electricity Prices on the Rise
- Electricity prices have already risen due to drought. Cost of water has increased and hydroelectricity capacity has been reduced.
- Modelling by Electricity Supply Association suggests a 20% reduction in carbon emissions by 2020 requires real electricity prices to rise by around 30%.
- The 20% reduction in carbon requires a $20 per tonne carbon price in 2010 increasing rapidly to $55 per tonne
- To meet the target, power generating companies will have to replace about one third of existing power station capacity, including most of the power stations in Victoria and South Australia.

* Lessons to be learned from European Carbon Trading
- Over allocation of permits in Europe resulted in a collapse in carbon prices in 2006
- Australian scheme is focussing on primary auction market which will hopefully avoid problems seen in Europe
- However, secondary market for trading with good liquidity is important as it establishes the market price for carbon on a day-today basis and allows participants to provide biggest cuts in carbon with lowest cost to economy and community
- Barriers to a liquid market developing are:
o If Government decides to have fixed price for carbon with a variable emissions cap, there will be no need for secondary market as companies can simply wait for next auction.
o The introduction of a price cap in ETS suggests that when price of carbon gets too high, “Carbon Central Bank” (Government) will print more permits. This would limit the interest of speculators which is key source of liquidity..
o Some sectors like Trade Exposed Industries that receive free permits might be able to sell their permits in auctions.

* Data Capture key to precise reporting
- Businesses with significant emissions will need to report by August 2009
- Companies that emit more than 25,000 tonnes per annum will be required to report. This covers about 1000 installations and 5% of Australian businesses.

* Voluntary company efforts lack clear credit
- Whilst Carbon Pollution Reduction Scheme is proposed to commence in 2010, some companies are voluntarily reducing emissions. (e.g. HBOS in UK).
- Whilst Australian Government will ensure this scheme operates under a uniform set of standards, no such single standard exists for voluntary market.
- There are a number of sets of standards, some of which are being used for bith compliance and voluntary schemes. The more recognised are include
o Clean Development Mechanism (CDM)
o The Gold Standard
o Voluntary Carbon Standard (VCS)
o The Climate, Community and Biodiversity Standards (CCBS)
o Australian Government’s “Greenhouse Friendly Program” (with Verified Emission Reduction units or VER’s)

Australian companies participating in the voluntary market include Origin Energy, Qantas and Virgin Blue.

* Increasingly, consumers are choosing to pay more for green electricity to limit greenhouse emissions
- Origin Energy reports claims that 360,000 customers in Victoria are choosing to buy the higher priced electricity generated from green or renewable sources

* Big Australian companies are now showing their credentials for sustainability
- KPMG estimate that about one third of ASX top 500 companies have published or expect to publish a sustainability report for 2007-08 financial year
- Global Reporting Initiative is a group that tracks sustainability reporting. They claim that Australian level of reporting is low compared to countries where reporting is mandatory. For example, in UK and Japan, rates of reporting are over 70% in top 100 companies.
- Federal Government’s Energy Efficiency Opportunities Act 2006 will require companies using more than 0.5 PJ or 139,000 MW energy or producing more than 125,000 tonnes of CO2 in 2008-09 to register and report emissions before December 2008.

* Clean Coal a burning issue goal for all players
- 83% of Australia’s domestic energy comes from coal
- exports of coal are worth around $21 billion per annum
- Co-operative Research Centre for Coal in Sustainable Development (CCSD) is one of key bodies responsible for research into making clean coal technology a reality
- CCSD receives $8 million in funding (total Government and industry funding amounts to $2.5 billion)
- 60% of CCSD research is focussed on technology that allows carbon dioxide to be captured and stored underground. That includes gasification, “oxyfuel” and post combustion capture.
- A $200 million demonstration plant for Oxy Fuel is expected to be operational next year at Callide A power station in Central Queensland. This will involve burning coal with recycled waste gas which allows CO2 to be cost-effectively captured (as concentration of CO2 is much greater than with normal waste gas);
- Expectations are that this technology can be retro fitted to existing power stations
- Gasification is another technology being researched at Queensland’s Zerogen and Victoria’s HRL-Harbin projects; BP and Rio were working on a $2 billion project in WA but this was abandoned recently when it was found the reservoirs offshore Perth were not big enough to store the CO2.
- Clean coal needs a relatively high carbon price to make it viable.
- coal won’t disappear as China builds it infrastructure around coal burning

* Scientists disagree over lack of sunspots
- We are at a cyclical low for sunspots
- Debate exists amongst scientists about the degree by which sunspot activity contributes to global warming. As we enter a cyclical low for sunspot activity, some scientists argue that the world will be going through a cooling phase.
- Whilst sunspot activity does influence global warming, most scientists believe industrial contribution of CO2 has a much greater influence

* Carbon Credits Market
- opportunities will open up for traders and funds willing to tap demand from investors concerned about carbon emissions
- ARKX first fund in Australia (about 70 overseas)
- ARKX invests in global listed equities (wind farms, geothermal, energy efficiency), official carbon credits and CDM projects (projects that generate Certified Emission reduction Certificates that can be traded in Europe).
-

Recent weeks has seen various commentators and industrial groups questioning the merits of the Renewable Energy Target.  I have always felt “20% renewable energy by 2020″ was too aggressive. Firstly, it is unclear whether technology can meet the target. In the short term, there is a significant backlog in wind turbines. Secondly, the renewable energy target, which runs in parallel with the Carbon Pollution Reduction Scheme, favour more expensive wind power, solar or geothermal energy over gas.  Gas is the lower cost alternative in terms of abatement of CO2.  The Australian Industry Group comments are reported in the artcile below from today’s AGE.

Renewable Energy Targets Ill-Advised 

The AGE

18 Aug 2008

Industry is warning that mandatory targets for renewable energy generation in Australia will cost more than $60 million to implement and undermine export industries.

The Council of Australian Governments (COAG) is being urged to dump the targets, Fairfax says.

Groups representing some of Australia’s biggest companies insist the federal government reconsider its proposal for 20 per cent of energy to come from renewable sources such as solar, geothermal and wind power by 2020.

And they also want state governments to wind back a fragmented patchwork of renewable energy schemes.

Australian Industry Group (AiGroup) chief executive Heather Ridout has warned in a submission that the federal government’s target is “an ill-advised and risky policy proposal that is likely to significantly increase the cost of greenhouse gas abatement in Australia”.

The submission, obtained by The Australian Financial Review, to a COAG working group’s discussion paper warns it will have “adverse impacts” for “households and businesses throughout the economy”.

The Energy Users Association of Australia, whose members include BHP Billiton and Amcor, estimate the target will cost electricity users an extra $2.2 billion a year and aluminium producers forecast it will cost them an extra $300 million a year.

Ron Knapp, the executive director of the Australian Aluminium Council, says the plan will “contribute to the loss of new investment opportunities and seriously threaten the future viability of the existing aluminium smelting industry in Australia”.

The COAG working group is due to report back to the October COAG meeting on the final design of the scheme.

Am interesting article from the Weekend Australian (Aug 9-10) which discusses the resurrection of scepticism on the extent of Global Warming:

Key degrees of difference Cameron Stewart, Associate editor | August 09, 2008 HAS global warming stopped? The question alone is enough to provoke scorn from the mainstream scientific community and from the Government, which says the earth has never been hotter. But tell that to a new army of sceptics who have mushroomed on internet blog sites and elsewhere in recent months to challenge some of the most basic assumptions and claims of climate change science. Their claims are provocative and contentious but they are also attracting attention, so much sothat mainstream scientists are being forced torespond.  

The bloggers and others make several key claims. They say the way of measuring the world’s temperature is frighteningly imprecise and open to manipulation. They argue that far from becoming hotter, the world’s temperatures have cooled in the past decade, contrary to the overwhelming impression conveyed by scientists and politicians.  As such, they say there should be far greater scepticism towards the apocalyptic predictions about climate change. Even widely accepted claims, such as that made by Climate Change Minister Penny Wong that “the 12 hottest years in history have all been in the last 13 years”, are being openly challenged.  “She is just plain wrong,” says Jennifer Marohasy, a biologist and senior fellow of the Institute of Public Affairs. “It’s not a question of debate. What about the medieval warming period? The historical record shows they were growing wine in England, for goodness sake; come on. It is not disputed by anyone that the Vikings arrived in Greenland in AD900 and it was warmer than Greenland is now. What Penny Wong is doing is being selective and saying that is a long time ago.”  But selective use of facts and data is fast becoming an art form on both sides of the climate change debate now that real money is at stake as the West ponders concrete schemes to reduce carbon emissions.

So what is the validity of some of the key claims being made by these new blogger sceptics?  Their first claim is that the most basic aspect of climate change science - the measurement of global warming - is flawed, imprecise and open to manipulation.  The earth’s temperature is measured using land-based weather stations - in effect, a network of thermometers scattered unevenly across the globe - as well as via satellites and ocean-based weather sensors. There are four agencies that measure the world’s temperatures and each has different methodology and produces varying, although not dramatically different, results.  Sceptics accuse climate change believers of always quoting the agency that shows the highest level of warming, the US National Aeronautic and Space Administration’s Goddard Institute for Space Studies run by prominent climate change scientist and activist James Hansen.  

An independent study by Yale University in the US shows GISS says the earth has warmed by 0.025C a year during the past eight years while the other best-known measurement agency, London’s Hadley Centre, says it warmed by only 0.014C a year during the same period. Not surprisingly, the Hadley figures are the most quoted by climate change sceptics while the GISS figures are most popular with climate change believers.  David Evans, former consultant to the Australian Greenhouse Office, says Hansen’s GISS is unreliable because it is the only measurement agency that relies almost wholly on land-based data instead of satellites.  “Land-based temperature readings are corrupted by the urban heat island effect,” he says. “Urban areas encroaching on thermometer stations warm the micro-climate around the thermometer due to vegetation changes, concrete, cars and houses.”  As such, he alleges that the GISS figures - which are enormously influential in the climate change debate - are “hopelessly corrupted” and may even be manipulated to suit Hansen’s views on global warming.  A group of weather buffs in the US also has attacked GISS’s methodology, putting together an online photo gallery of US weather stations at website www.surfacestations.org that shows some thermometers situated next to asphalt runways and parking lots where they would pick up excess warming.  But GISS says the distorting impact of this urban warming is negated because data from these stations is modified to remove these effects and give a true reading. Hansen acknowledges there may be flaws in the weather station data because temperature measurement is not always a precise science. But he says this does not mean big-picture trends can’t be drawn from the data.  He says: “That doesn’t mean you give up on the science and that you can’t draw valid conclusions about the nature of earth’s temperature change.”  Hansen has been infuriated by the attacks on GISS by climate change critics. Last year Canadian blogger and retired businessman Stephen McIntyre exposed a minor mistake in Hansen’s figures that had caused GISS to overstate US temperatures by a statistically small 0.15C since 2000.  Sceptics were energised. “We have proof of man-made global warming,” roared conservative American radio host Rush Limbaugh. “The man-made global warming is inside NASA.”  Hansen struck back, saying he would “not joust with court jesters” who sought to “create a brouhaha and muddy the waters in the climate change story”.  

What the bloggers have succeeded in doing is to highlight that measuring climate change is an evolving science. But their success has been at the margins only. So far they have failed to prove that these discrepancies negate the broader core arguments about the trends of global warming.  However, the second argument being put forward by blogger sceptics is more accessible to the public and therefore is having a greater impact. They argue that, contrary to the impressions given about global warming, the earth’s temperatures have plateaued during the past decade and may have cooled in recent years. This, they argue, should not be happening when carbon emissions are growing rapidly. This was not what the climate change modellers predicted. Their conclusion therefore is that carbon emissions are not the driver of warming and climate change and that the earth is not heading for a climate change apocalypse caused by greenhouse gases.  “All official measures of global temperature show that it peaked in 1998 and has been declining since at least 2002,” says climate change sceptic Bob Carter, a science adviser to the Australian Climate Science Coalition. “And this is in the face of an almost 5 per cent increase in atmospheric carbon dioxide since 1998. Spot the problem?”  

A careful analysis of global temperature graphs from each of the measurement agencies confirm that - despite variations between them - there has not been any notable warming since 2000. Depending on which graphs you use, global temperatures since 2000 have been more or less flat. Some, such as the GISS data, show a modest rise, while others show negligible movement and even a small fall in recent years.  Sceptics like to use graphs that date from 1998 because that was the hottest year on record due to El Nino influences and therefore the temperature trends for the decade look flattest when 1998 is the starting point.  But ultimately this is a phony war because most mainstream scientists do not dispute that global temperatures have remained relatively flat during the past decade. Where they differ with the sceptics is on how this outcome should be interpreted.  “The changes in temperature over the past 10 years have basically plateaued,” says Andy Pitman, co-director of the Climate Change Research Centre at the University of NSW. “But scientists did not anticipate a gradual year-by-year warming in temperature. What matters is the long-term trend. This outcome does not change any of the science but it does change the spin climate deniers can put on it.”  The sceptics are having a field day with this trend. The IPA’s Marohasy says: “In the last 10 years we have seen an increase in carbon dioxide levels yet temperatures are coming down. That, if anyone looks at the actual data, is not disputable. Carbon dioxide is not driving temperatures because there are other important climatic factors at play.”  

Most scientists are adamant that any assessment of climate change based on only 10 years of data is not only meaningless but reckless.  “From a climate standpoint it is far too short a period to have any significance,” says Amanda Lynch, a climate change scientist at Melbourne’s Monash University. “What we are seeing now is consistent with our understanding of variability between decades. If we hung about for another 30 years and it kept going down, then you might start to think there is something we don’t understand. But the evidence at this point suggests this is not something we should hang around and wait for.”  Climate change scientists say we must go back much further than the past decade and pay attention to the longer-term trend lines that run through the temperature data and clearly trend upwards. Lynch says other factors beyond temperature are also relevant. “In the last 10 years there has been a catastrophic and massive Arctic sea ice retreat. We’ve seen glacial retreat, permafrost thaw and ocean thermal expansion, so temperature is not the whole story.”  

But the sceptics are undeterred. “It is widely alleged that the science of global warming is settled,” says the US-based Science and Public Policy Institute. “This implies that all the major scientific aspects of climate change are well understood and uncontroversial. The allegation is profoundly untrue … even the most widely held opinions should never be regarded as an ultimate truth.”  Matthew England, from the Climate Change Research Centre, describes the latest blog war by climate change sceptics as an amazing phenomenon. “Climate change is a robust area of science and there is plenty that is still being debated and new discoveries are still being made,” he says. “It is a topic (that) will keep attracting different opinions from enthusiasts and from bloggers. They are a minority but they are proving to be a very vocal group.”

There is plenty of commentary in the press on the Government’s Green Paper on their plan for Carbon Pollution Reduction Scheme.  As the report is quite long and some of the commentary focuses only on politically-senstive aspects of the Emissions Trading Scheme, I have written a summary below which I hope captures the main features. I wrote more to ensure I had a reasonable understanding of the Green Paper. 

Carbon Pollution Reduction SchemeCarbon Pollution, mainly in the form of CO2 emitted from the burning of coal and oil, is contributing to Climate Change. It is highly likely if not certain that this Climate Change, driven by increasing levels of CO2 in the atmosphere, is resulting in higher temperatures, rising sea levels, more violent weather events and, in some parts of the world, more droughts.  

Whilst Australian emissions as a share of global emissions are insignificant when compared to those from China, India and USA, Australia is the largest global emitter per capita. Given this and a desire to lead by example and hopefully encourage the developing world to join in, the Australian Government ratified the Kyoto Protocol and is now trying to set the country on a path to reduce its impact on global warming. In terms of emissions reduction, the Federal Government has committed Australia to achieving a 60% cut in national greenhouse gas emissions (CO2) from 2000 levels by 2050.   

The recently-released Green Paper on the Green Carbon Pollution Reduction Scheme describes the Government’s current thinking on how the nation gets to that goal. It is a discussion paper and industry, businesses and individuals are able to provide comments. The emissions scheme is based on the concept of “Cap and Trade”. Emissions will initially be capped at some to-be-agreed level, say 400 million tonnes per annum at the start of the scheme, and this cap will be gradually reduced each year to around 200 million tonnes in 2050.   The rate at which the reduction takes place is referred to as the “trajectory” and this will be the subject of debate and discussion on an ongoing basis over the years. In fact, the trajectory will be adjusted every few years to take into account how the rest of the world is progressing to reduce carbon emissions and whether any global reduction agreements are concluded between countries.  

Affected businesses and industry will be required to acquire permits for every tonne of carbon that they emit.  Stationary energy from power stations and other fuel burning installations contributes around 50% of Australia’s emissions. Given this and for ease of monitoring, the cap and trade scheme will focus on the biggest polluters that account for roughly 80% of stationary emissions.  Emissions produced by firms will be monitored and audited and around 1000 burning installations that emit more than 25,000 tonnes per annum of CO2 equivalent will be required to have permits for each tonne emitted. At the end of each year, firms will need to surrender permits for their emissions or pay a penalty for any shortfall in permits. The total number of emission permits will be limited to the total carbon cap for the Australian economy. It is still to be decided what proportion of permits will be auctioned and what if any permits will be given away free of charge.  

The cost of carbon permits auctioned off is expected to start off at a relatively low level, perhaps around $20 per tonne, but will increase as the cap level is reduced. These costs, paid for by electricity generators, will flow through to consumers in the form of higher electricity prices. It may turn out to be cheaper for some firms to reduce their emissions rather than bid for permits.   A central carbon regulator (akin to a “Reserve Bank for Carbon”) will manage the carbon auction and allocation process with any revenue raised from the being passed back to the Australian economy in the form of assistance to low income earners, subsidies to “trade exposed” industries and research into technologies that will reduce carbon.    

An example of a “trade exposed” industry is aluminium smelting which uses significant amounts of electricity. Aluminium is of course a global commodity so domestic producers will sell into a market that also haso aluminium produced from countries like USA, China and India, that do not have a carbon cost regime. Without financial assistance, domestic aluminium smelters would have much higher costs than overseas smelters. This would eventually lead to the shutting down of Australian smelters with the additional demand for smelting capacity being picked up offshore.   

The Government has also signalled it will provide some assistance to existing electricity generators though the extent is unclear at this stage. In addition to electricity generators and other fuel burning installations, transport fuels like petrol and diesel will include carbon permit costs. The Government however has already stated it will reduce the fuel excise for heavy vehicle users on a cent-for-cent with any carbon permit related increases, at least for the first three years of the scheme.  Aviation fuel is a particularly interesting case as flights out of Australia will be paying for fuel loaded with a carbon price but will need to compete with airlines that do not have to bear this cost. Consequently, Qantas will probably seek assistance as a “trade exposed” company.