Fair Deal if Emissions Target Between 7% & 15%

If Australia increased its emissions target from 5% to between 7% and 15%, we could rightly say we were contributing our fair share to the global target. Tim Flannery fears the new Australian Prime Minister will find herself held hostage to manipulation and lies from both Liberals and Greens. It would be far better for the Julia Gillard and the country if she gathered the courage to press on with the emissions trading scheme and face the inevitable political cost.

Tim Flannery in Sydney Morning Herald (3 July 2010):

Julia Gillard has put the emissions trading scheme back on the political agenda, saying that after the election she will work to build a consensus to pass it. Yet the government’s proposed scheme continues to be misrepresented by Greens and Liberals seeking their own political advantage, making consensus-building impossible. The Greens claim it’s an unambitious, do-nothing scheme, while the Liberals portray it as a monstrous, economy-destroying tax. Both are just plain wrong.

If implemented it would see Australia emitting 5 per cent less greenhouse gas in 2020 than it did in 2000. Without it, high population growth and industrialisation would see Australia’s emissions soar, by 2020, 26 per cent above the target. Imagine cutting your own emissions by about a quarter, and the high ambition of the scheme becomes apparent.

But would it see Australia doing its fair share to avoid dangerous climate change? In The New York Review of Books Nicholas Stern tallied all the emission reductions pledged under the Copenhagen Accord. With more than 100 countries already signed up, humanity is set to be emitting 48 billion tonnes of CO2 by 2020 – up a mere billion tonnes from today’s 47 billion tonnes.

To avoid dangerous climate change (a warming of less than 2 degrees) we need to reduce emissions to about 44 billion tonnes by 2020. This could be achieved if Europe agrees on its planned 30 per cent target rather than the current 20 per cent, and the US and other developed nations increase their own targets by a few percentage points.

If Australia increased its target from 5 per cent to between 7 per cent and 15 per cent, we could rightly say we were contributing our fair share to the global target. This is a far cry from the Greens’ unrealistic demands for 25 per cent to 40 per cent cuts.

The cash handouts and other compensation paid to polluters under the scheme have attracted particular ire. Many believe they compromise the scheme’s effectiveness, but this is just not true. The 5 per cent reduction is unaffected by such give-aways.

Ross Garnaut argued against industry handouts but the Rudd government was unable to resist the avalanche of compensation claims – though thankfully these will phase out. It is regrettable to use taxpayers’ dollars to buy off aggressive industry lobbies but we should not let this legacy of a weak and cowed government blind us to the scheme’s effectiveness in reducing emissions.

Nor should we forget it is one of the most comprehensive emissions trading schemes ever devised, and also one with the fewest give-aways of free permits – with 70 per cent to be auctioned.

The Greens argue that allowing industry to offset emissions into forestry and agriculture is a kind of get-out-of-jail card for polluters. Again, this is not true. Offsets into agriculture will have to be real, and will come at a cost. Moreover, in a recent analysis of projected global emissions reductions the consultancy McKinsey has argued that about half of global emissions avoided by 2020 will have to come from agricultural and forest offsets, simply because the required scale of reductions is so great, and time so short.

Tony Abbott’s catchcry about the scheme being a ”great big new tax” would be laughable were it not so dangerously misleading. It directly affects only the nation’s largest emitters of greenhouse gases, and it is not a tax but a trading scheme that minimises the cost of emissions reductions.

Several emissions trading schemes now operate worldwide (with New Zealand’s beginning this month), and we can learn of their impacts from the older schemes. The US German Marshall Fund recently assessed the economic impact of the European scheme. Between 2005 and 2008 it had reduced European emissions by between 2.5 per cent and 5 per cent, yet no company surveyed by the Marshall Fund was able to identify any negative impact whatsoever on profitability. Not one.

It is increasingly clear only one thing changes when emissions trading schemes are introduced – the level of emissions. Without the scheme, Australia cannot cost-effectively attain its emissions target pledged under the Copenhagen Accord. The renewable energy target will get us about halfway there. But as recently explained in his Deakin lecture by the chief executive of Origin Energy, Grant King, neither energy efficiency targets nor any other mechanism under consideration by the government can compensate for the loss of the emissions trading scheme.

He also noted that deferring it until 2013 renders it useless, because by then all major decisions on infrastructure spending required to reduce emissions by 2020 are likely to have been made.

All too often economists and politicians underestimate the ingenuity of businesses when faced with an additional cost. Buying a pollution permit is just one of hundreds of costs faced by any company, and experience in Europe and elsewhere shows that engineers often find surprising ways to reduce emissions. But this simply doesn’t happen without a cost on carbon.

The scheme is far from perfect but it is essential in our battle to reduce emissions. In seeking a consensus on its introduction, I fear Julia Gillard will find herself in the same position as Kevin Rudd – held hostage to manipulation and lies from both Liberals and Greens. It would be far better for the Prime Minister and the country if she gathered the courage to press on with the scheme and face the inevitable political cost.

Professor Tim Flannery is the chairman of the Copenhagen Climate Council.

Source: www.smh.com.au