12 September 2008
Key Points:
The relatively low 2020 target will surely please businesses.
Australia should commit to reducing emissions by 10 percent at 2020 (30 percent per capita) and 80 percent (90 percent per capita) by 2050 compared to 2000 levels says Garnaut's eagerly awaited report on targets and trajectories released on 5th September 2008.
The relatively low 2020 target will surely please businesses concerned as to the effect carbon prices will have on profitability although not the Greens who favour a target of 40 percent reductions from 1990 levels by 2020.
Garnaut also recommends that the 2020 target should only apply in the context of an effective global agreement designed to stabilise global concentrations of greenhouse gases at 550 ppm by 2050.
Lower stabilisation not possible at this time
Although a 450 ppm goal "would better suit Australian interests", the Garnaut Review reluctantly concludes that international agreement on a global goal of 450 ppm is not possible at this time due to "the awful arithmetic of developing countries emissions in the Platinum Age". Garnaut does not rule out the possibility of a more ambitious goal in the future and recommends that "Australia should now indicate its willingness to play its proportionate part in future, and if possible early, movement towards a more ambitious goal than 550 ppm" with the details of the recommended targets and trajectories being "the best available to us now" and not "the best for all time".
In a "450 ppm overshoot scenario" Australia's emissions would need to be reduced by 25 percent by 2020 (40 percent per capita) from 2000 levels with a 90 percent reduction by 2050 (95 percent per capita).
Targets in the absence of global agreement
In the absence of a comprehensive agreement on global greenhouse gas emissions reductions, the Review recommends that Australia should commit to reducing emissions by 5 percent (25 percent per capita) from 2000 levels by 2020. This figure is consistent with the Government's target of reducing emissions by 60 percent of 2000 levels by 2050.
Per capita allocation is only possible basis
The Review concludes that per capita allocation is "the only possible basis for an international agreement that includes developing countries, many of which have insisted on convergence over time to equal per capita entitlements".
The proposed targets selected by Garnaut for Australia (which are based on per capita allocations) have been selected because they involve comparable abatement effort for Australia to other developed and developing countries. Despite the fact that Australia will have higher per capita reductions than many other developed countries (for example, the EU's per capita target would be a 17 percent reduction by 2020), Garnaut believes that the per capita approach "is in Australia's national interest because the costs of accepting the approach are manageable, and because it provides the best chance of reaching an international agreement that reduces the risks of dangerous climate change to acceptable levels".
Emissions trading and price of permits
Garnaut concludes that irrespective of whether global agreement is reached on emissions reduction, Australia should put in place a domestic emissions trading scheme from 2010 which it states is the "necessary centrepiece in Australia's effort to reduce emissions".
The Review recommends that during the 2010-2012 period, Australia should ensure that it meets its Kyoto commitment (which it is on track to do) and that permits should be sold at a fixed price, starting at $20 in 2010 and rising each year by 4 percent plus the percentage increase of the consumer price index. It believes that "this is more or less the price path that the modelling suggests would be followed if there were effective global agreement directed towards stabilisations of global greenhouse gas concentrations at 550 ppm" and so "the fixed price is likely to allow relatively seamless transition to a floating price regime". Such price fixing, it concludes, "will provide a less anxious environment" for implementing strategies to assist trade-exposed industries.
In the absence of any international agreement at Copenhagen or thereafter, Garnaut recommends that Australia should maintain an emissions trading scheme continuing with fixed prices for permits until international agreement or 2020. This, the Review concludes "would help to keep hopes alive of an international agreement, at reasonable cost, until all opportunities for progress had been exhausted".
Cost to Australia
The review's modelling concludes that the cost to Australia of mitigation would be 1.1 percent of GDP by 2020 under a 550 ppm scenario and 1.6 percent of GDP by 2020 under a 450 ppm scenario.
The next instalments
Garnaut's final report is due at the end of September and the Government is set to release the Treasury modelling in October with Government recommendations on targets being released alongside the White Paper at the end of the year.
For further information, please contact Brendan Bateman.
