The Australian Dec 16 THE Rudd Government has announced modest greenhouse gas reduction targets and generous compensation for industry and households in a political compromise that softens the proposed emissions trading scheme in response to the ravages of the global economic crisis.

In a move that outraged conservationists and only partially appeased industry, Kevin Rudd made an unconditional promise to reduce Australian emissions to 5 per cent below 2000 levels by 2020.But if other major emitters - including developing countries such as India and China - signed on to substantial emissions reductions in a UN agreement due to be finalised in Copenhagen late next year, Australia could cut its greenhouse pollution by up to 15per cent by 2020.

The Prime Minister defended the targets because, given Australia’s growing population, they represent a tougher per capita reduction than promises by the European Union. Conservationists said the scheme was a sell-out to industry because it did not pledge the deep cuts Australia would need to make as part of a global deal to stop global warming at 2C above pre-industrial levels.“This is one of the most ambitious schemes anywhere in the world … none of this is easy, it is real hard, it is like turning around the Queen Mary,” Mr Rudd told the National Press Club, where his address was interrupted while green protesters were dragged out.“These targets are appropriate and responsible. They deliver necessary reform to tackle the long-term challenge of climate change, while supporting our economy and securing jobs during this global recession,” he said.

The Australian Conservation Foundation vowed to mobilise public opinion to force the Government to toughen up the scheme. “This is a bad package, a weak package … voters will demand it be revisited and that means it won’t deliver business certainty either,” said ACF chief executive Don Henry.

But industry groups said even a 5 per cent target would be extremely difficult to meet, particularly in the current economic climate.

The Australian Chamber of Commerce and Industry said that “while the Government has attempted to soften the blow on the economy, today’s announcement is high-risk for an economy structured like ours … Introducing the scheme unilaterally and at a time when our economy is trying to stare down a global economic recession is too high a risk.”

The Business Council of Australia offered guarded support, but the Minerals Council said Australia was still moving “too far ahead of the rest of the world”.Softening the scheme did appear to improve the Government’s chances of getting it through the Senate with Coalition approval, after Opposition spokesman Andrew Robb said the Coalition would “approach it with an open mind” - including on the question of the 2010 start date, which it had previously said it would oppose.

The Coalition has commissioned the Centre for International Economics to review the Government’s scheme, buying time until the end of February to finalise its position on legislation that the Government wants passed by next June.The Government will use the $11.5billion it will raise from auctioning emission permits from 2010, at an expected price of about $25 per tonne, to cushion households and heavily hit industry.

Pensioners and low-income earners will be more than compensated for the 18 per cent spike in electricity prices with increases in the pension, low-income tax offset and family tax benefits A and B, as part of a $3.9billion household assistance package. More than half of middle-income earners will be no worse off, and almost all middle-income earners will get some assistance from the payments.

The Government is also working behind the scenes on an energy efficiency package that will offer grants and loans to households for in-home changes to reduce their emissions, further softening the impact of the ETS and providing more fiscal stimulus to combat the economic downturn. Another $2.9 billion will be paid in the form of free permits to trade-exposed emissions-intensive industries as part of a more generous compensation package in response to the furious backlash to the discussion paper.

Up to 25 per cent of permits will be given to industries competing in international markets that don’t impose a carbon price - up from the 20 per cent proposed in the Government’s discussion paper in July. Industries such as LNG, petroleum refining, pulp and paper, plastics and glass will be eligible to apply for free permits under a system that lowers the compensation threshold and relaxes eligibility rules.Coal mining, which produces vastly different amounts of methane depending on the geological make-up of a mine, is not eligible for free permits, but after intensive last-minute negotiations it is being offered $750 million over five years in a special abatement fund to help mines reduce their emissions. And about 5 per cent of permits - worth about $700million in the first year - will be offered for free to brown coal-fired generators and the dirtiest black coal-fired generators to partially compensate them for vastly increased costs and to guard against sudden plant closures and disruptions to electricity supply.

The Government will release draft “exposure” legislation for its plan at the end of February and will conduct its first permit auction in the first half of 2010 to prepare for the scheme’s commencement in July.The scheme will require 1000 Australian companies emitting more than 25,000 tonnes of carbon to buy permits to cover their emissions, either in Australia or in internatinoal markets created under the Kyoto Protocol.

Cash outweighs the sacrificeIT has almost one-third the cost of the GST, yet the compensation kitty is three times as generous. Kevin Rudd’s carbon pollution reduction scheme is a form of cash-for-sacrifice. The risk in choosing to give households back more in handouts than the higher gas and electricity they will face under carbon trading is that the price signal is dulled beyond all meaning.

Perhaps the simplest way to grasp the timidity of Labor’s program is to compare its hip-pocket effect of reducing greenhouse gases with that of reforming the indirect tax system 10 years earlier.

The scheme is expected to add 1.1 per cent to inflation in 2010-11. The GST was forecast to increase consumer prices by almost double that amount, 1.9 per cent, in its first year of operation. The following year, when the new tax system was to be in full flight, the inflation effect was put at 3.1 per cent.  Yet by the second year of the carbon pollution reduction scheme, Labor will be giving households three times as much as the tax cut John Howard attached to the GST.

The scheme will collect $12 billion from carbon permits in 2011-12, of which $6 billion will go back to households indirect payments and a further $2billion will come from the reduction in fuel excise. The GST proposed at the 1998 election was to raise $32 billion in 2001-02, of which $17.8 billion was used to abolish the wholesale sales tax and a further $12.4 billion was to remove existing state taxes. That left just under $2 billion in GST cash for income tax cuts - or one-third the amount that Labor will give back from the carbon pollution reduction scheme’s revenue.

The balance of the Coalition’s money for personal tax cuts came from other sources at the time, most notably business and bracket creep. Compensation came via the back door; Labor’s model is more direct. But even these macro sums obscure how obliging Labor wants to be. Take the example of a single-income family on $70,000 a year with two children. They will be $437, or $8.40 a week, better off in 2010-11 because their handout of $1037 comfortably exceeds the $700 increase in their cost of living from carbon trading. Or how about an age pension couple with $65,000 in private income? They will collect a net benefit of $1636, or $31.50 a week. Labor will be giving back more than it asks of all sole parents earning up to$160,000 as well as single-income couples, and dual-income couples earning as much as $120,000 - depending on the number of children. All pensioners will be better off, as will self-funded retirees earning up to $50,000 for singles and $90,000 for couples. These aren’t transitional arrangements, but generous tax cuts covering virtually every voter in the mortgage and grey belts.

The exception to Labor’s rule of cash-for-sacrifice is the people most likely to support the environment: singles. Only those earning up to $35,000 a year are better off under the carbon pollution reduction scheme. For singles on more than $80,000, there is no handout at all. So it begs the policy question: why limit the job of reducing greenhouse gas emissions to singles and those on the very top of the income ladder? Treasury explains there are a couple of advantages in erring on the side of excess compensation for families. First, the most vulnerable households in the bottom half of the income ladder are the least able to switch to cleaner energy sources. Second, the package “provides a buffer for households whose cost-of-living increase proves higher than estimated”. Both points would be fair enough if Labor had restricted its cash tightly to those on fixed incomes: age pensioners, the disabled, the unemployed and jobless sole parents. But this is a relative bonanza for middle Australia.

Perhaps the carbon pollution reduction scheme should be renamed the Kevin Pollution Index. The KPI is one-part climate science and one-part cold polling, because it shifts the burden of greenhouse gas abatement beyond the election after next.

Article from:  The Australian MALCOLM Turnbull has left the door open to supporting the Government’s modest 5 per cent target for reducing greenhouse gas emissions by 2020 despite the Greens slamming the goal as a a global embarrassment.

Liberal strategists have confirmed to The Australian Online that if an independent white paper commissioned by the Coalition on the target finds the goal can be delivered without damage to the economy, it may support the new targets in the Senate.

Negotiating with the Coalition remains the Government’s preferred position because any Senate deal with the Greens is likely to demand a much tougher target with less support for industry.

The only problem would be ensuring the Coalition actually voted as a block on a trading scheme because deep divisions remain among Liberal sceptics over the wisdom of a carbon reduction scheme and even the existence of climate change.

Previously, the Coalition has warned the introduction of an emissions trading scheme must be delayed beyond the Government’s 2010 goal to 2012 or even beyond as a result of the global financial crisis.But in a statement today, the Liberal leader said: “We will not be rushed into endorsing, opposing or suggesting amendments to this proposal.”

Mr Turnbull warned the devil was in the detail and said the Government had failed to take into account the implications of the global financial crisis in the context of this ETS.“

As a consequence, very little is known or understood about the transition costs to an emissions trading scheme over the next 10 to 15 years,” he said.“If Government gets this wrong, it will simply mean exporting jobs and emissions offshore while doing nothing to save the Murray-Darling Basin or the Great Barrier Reef.“That is why we have commissioned an independent economic analysis of the White Paper.“

The analysis will be conducted by the Centre for International Economics, led by its Chairman and Executive Director Mr David Pearce, an accomplished economist who has already undertaken a large amount of work on climate change issues, including emissions trading.”But Mr Turnbull failed to restate his commitment to delaying the introduction of an ETS in Australia in today’s statement. Even if the Coalition sticks to its guns on delaying the start date it may support the 5 per cent target in the Senate.Opposition emissions trading spokesman Andrew Robb said today: “The Coalition will assess the scheme, the targets and the start date with an open mind, but our final position will be heavily influenced by whether or not the Government’s white paper forces Australian jobs and emissions offshore.”

Earlier today the Greens said the 5 per cent targets fly in the face of calls from scientists for countries to slash emissions by 25-40 per cent to avert catastrophic climate change.“This is a complete failure of a system,” Greens Senator Milne told ABC Radio.“Five per cent is a global embarrassment, 15 per cent is way below even the minimum the rest of the world wants to see.”But Mr Rudd said Australia’s targets on a per capita basis are higher than the European Union’s aim to make a 20 per cent cut by 2020.“

If the Europeans were to embrace the same per capita obligations that we are about to embrace then you would be seeing European reductions in the vicinity of 30 per cent.“There is a headline effect here … there’s also a real comparison to be made. The task of Australian diplomacy this year will be to exert every effort to get a substantial agreement.Greenpeace accused the Prime Minister of betraying Australians on climate change.“Mr Rudd has betrayed the science, betrayed the community and betrayed the next generation who will have to live with climate change impacts,” he said.“He has caved in to the bullying tactics of the coal and other polluting industries.”“That is why we have commissioned an independent economic analysis of the White Paper.  

Rudd sets 5pc greenhouse gas emissions cut target

UPDATE: Samantha Maiden | December 15, 2008 Article from:  The Australian

AUSTRALIA will set an “unconditional” 2020 target of reducing greenhouse gas emissions of just 5 per cent if the world fails to act on climate change.

The Rudd Government has committed to a reduction of between 5 and 15 per cent in carbon emissions by 2020. But the Rudd Government has flagged deeper cuts of up to 15 per cent on 2000 levels by 2020 if international agreement can be reached to aggressively cut emissions around the world.  

Unveiling the targets today, Climate Change Minister Penny Wong conceded the cost of an emissions trading scheme will increase electricity prices by about $200 a year but pledged the Government will deliver a $6 billion-a-year package of compensation to householders, including boosting the pension and family tax benefit payments to low income families. The 2.5 per cent increase to pensions above indexation flagged today will deliver around $382 for singles and $320 for each member of a couple. Compensation to affected industries has also been significantly boosted by measures including lowering the threshold of the 60 per cent rate of assistance.“This is a reform that is all about transitioning to a different economy,” Senator Wong said today.

“These are hard targets for Australia. We were very clear after our discussions with business in the current economic circumstances we needed a very clear marker by 2020 about what the parameters of change would be. “We don’t want a perverse situation where we have carbon leakage, companies moving offshore for little environmental benefit.”

The Government will also cut fuel tax “cent for cent” when the scheme commences in July 2010. It will make further fuel tax cuts every six months, if required for three years.Echoing climate change adviser Ross Garnaut’s recent intervention in the debate in The Australian,  the Government is arguing on a per capita basis the modest cuts represent a reduction in emissions of around 30 per cent below 2000 levels when population is taken into account. The higher carbon reduction target of 15 per cent will only be implemented if “all major economies commit to substantially restrain emissions and advanced economies take on reductions comparable to Australia.”Under an emissions trading scheme, it predicts that the initial carbon price of around $23 a tonne in 2010 to meet the 5 per cent target. After emissions intensive industries are effectively “taxed” this amount, all the revenue collected by the Government will be returned as compensation to pensioners, families and emissions intensive businesses.

The white paper warns that the cost of inaction is likely to be measured in an increase in the severity of natural disasters such as bushfires, cyclones, hailstorms and floods. Delaying action will increase the risks of climate change and the costs of future action.

It also forecasts that the frequency of drought may increase by up to 20 per cent over most of Australia by 2030 - up to 40 per cent in south-east Australia and 80 per cent in south-west Australia by 2070.

The impact of such devastating droughts on Australia’s GDP is estimated to be far more significant than the short term impact of emissions trading scheme.

The paper also addresses Opposition fears that the impact of the global financial crisis demands a delay in the introduction of the scheme until 2012 or beyond.

“Taking action on climate change now is economically responsible,” the paper says.   

The AFR today has their now reglar quarterly feature on Carbon. In summary:

“Emissions priorities questioned in crisis” 

- cost of world’s financial woes provide another weapon against post-Kyoto

- possible recession may help cut emissions as industrial activity slows

- there are hopes of substantial cuts at meetings in Copenhagen next month and Poznan (Poland) in Dec 2009

“Remedial costs now cast as palatable”

- Ausralia’s GNP will remain robust through emissions cuts based on new modelling

- But crticis claim that Treasury was looking at the world through “rose coloured glasses”

- The business community takes issue with Treasury’s assumptions about a likely global climate change agreement

- Barack Obama’s election to the US presidency and growing environmental concerns within China and around the world provide grounds for optimism

“Heavy emitters claim ETS will force them out”

- Zinc smelter Nystar claims the Australian emissions trading scheme would cost them $70 million per annum at a carbon price of $40 per tonne

“Aussie exchange warms up offset market”

- Lively voluntary trading has already pushed up the price of carbon offsets

- Before the Australian Climate Exchange opened, over-the-counter carbon credits could be bought for just $3 to $4 a tonne

- In July, the price of a carbon dioxide equivalent reached a peak of $12.50

- Participants in the voluntary carbon market can purchase and trade in abatements, most commonly carbon offsets

“Leaves offer clues to warming”

- Scientists are using a new discovery to test climate theory

- studying leaves found in peat bogs can show the variations in CO2 in pre-industrial era

- this study could wipe out 15% of the increase in C02 attributed to industrialisation

The Australian reports today that ExxonMobil has joined other companies by appealing to the Federal Government to  delay the introoduction of the Carbon Pollution Reduction Scheme.  Simultaineous with this, Ross Garnaut is reported as stating that we should push on with the implementation of the scheme.  Perhaps rumours that the Government will consider a flat $10 per tonne carbon tax for the first few years might actually turn out to be correct.

We must press ahead on climate change, Garnaut warns

Stuart Rintoul | October 17, 2008

THE “diabolical” policy problem of climate change should not be pushed into the background by the financial crisis, Ross Garnaut has warned.

The Rudd Government’s adviser on global warming said the unprecedented financial crisis of the past month might cause governments to reconsider their commitments on climate change, but it would be bad policy “to allow the approach to important long-term structural issues to be determined by short-term cyclical considerations”.

Speaking at Melbourne University at the launch, by Governor-General Quentin Bryce, of his climate change review as a book, Professor Garnaut said: “We need to begin by noting this is not a matter of choosing the environment over the economy, or the economy over the environment.

“The issue of climate change is an economic issue. The issue is one of short-term economics versus long-term economics, because the economic costs of unmitigated climate change on a balance of probability would be very, very high.”

In considering this choice, he said, “we should think a little bit about how (the world) got into the current financial mess, simply because the world focused for too long on short-term economics”.

Professor Garnaut said the acceleration of economic growth in China and other developing nations, which made emissions reform more urgent, “will not be knocked away by the current financial crisis” and that “financial crises in general, however severe, are short-term phenomena”. He said the current crisis would have run its course before the UN climate change conference in Copenhagen late next year.

“By contrast, climate change is a long-term structural issue. It is bad policy to allow the approach to important long-term structural issues to be determined by short-term cyclical considerations.” The accelerated growth after a world recession would “be a favourable time to implement policies involving major investment in new technologies involving considerable structural change”.

Asking himself, rhetorically, whether the post-crisis political environment would cause climate change to be downgraded, he replied: “It may. That will depend on the quality of leadership in many countries.”

The Garnaut Climate Change Review has been published, on 688 pages of “carbon-neutral paper”, by Cambridge University Press Australia ($79.95).

I was recently reading a research report on coal published by Barclays Capital.  Some of the interesting facts and issues outlined in the report were:

 - Price of coal went from US$30 per tonne to $60 in 2003 and then doubled again between September 2007 and July 2008.

- Coal recorded the largest year on year consumption increase of all commodities at 4.5%, due in main to China and India

- Consensus is emerging that the future of coal will depend on the development of “clean coal” technology, in particular carbon capture and storage

- 38% of world’s electricity comes from coal. It has been the cheapest base load source of power but this will be impacted by carbon pricing.

- Reserves to production ration was estimated at 133 years in 2007. (c.f. 60 years fot natgas ans 40 years for oil);

- Coal fired CO2 emissions in China have grown from 600 million tonnes in 1990 to around 3 billion tonnes per annum today. Similarly, India’s coal fired CO2 emissions are running at around 500 million tonnes per annum today.

- Australia has 55% share of global metallurgical exports and about 17% of thermal coal exports.

- Capture of CO2 can be done before, during or after combustion of coal. Injecting CO2 into underground storage is not a new technology though the ability of reservoirs to leak is a risk that has not yet been tested.

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.