Ross Garnaut’s draft report paints a disturbing picture of the potentially immense costs of climate change for Australia, and the difficulties of getting the right policy response. Describing climate change in his Press Club speech today as a “diabolical policy problem” that is “uncertain”, “insidious”, “long-term in both effects and solutions” and requires international action, Garnaut suggests there is a need for early, strong mitigation before the problem gets beyond human control.

However, the report stresses that Australia, even if it is exposed to climate change more than any other developer country, has never been better placed to take action, given the continuing resources boom and the benefits of the economic reforms of the 1980s – indeed, Garnaut stresses, there are potential opportunities for Australian industry.

An emissions trading scheme is obviously the centrepiece of Garnaut’s proposed response, but the report also flags the need to undertake massive investment in low emissions technologies – up to $3b a year, improve the capacity of network infrastructure (such as electricity transmission grids) to complement carbon mitigation activities, and address information problems to enable Australians to improve the efficiency of their energy usage.

Garnaut’s ETS is a hardline model that will displease energy-intensive sectors. He excludes agriculture until measurement and information problems can be sorted out, and also omits waste and forestry from the initial stages of the scheme. There may be some criticism of this from farming groups, who have argued that agriculture should be included and awarded free permits to cover their past cessation of land clearing, which has been the sole reason Australia has met its Kyoto targets.

Everything else, including transport and energy production, would be included from the get-go. The emissions target forming the basis of the scheme will initially be the Kyoto target, but afterwards progressively more ambitious (further detail is to await Garnaut’s supplementary draft report, containing all the review’s modelling, later in the year). Permits are to be auctioned “at regular intervals” – weekly, monthly or quarterly, depending on industry preference, and will be overseen by an independent carbon bank.

Critically, in the first two years of the scheme, a fixed price would apply.

The report recommends that half the revenue raised from the scheme be directed at compensating households – and specifically at the lower half of the income scale. 30% would go to assisting trade-exposed industries and the remainder to fund low emissions technology research.

Garnaut was critical of suggested delays, directly contradicting the emerging Opposition argument led by Malcolm Turnbull that the Howard Government’s original timetable of 2012 should be stuck to. “Delay is a decision in itself,” he said today. “We should have started this process several years ago.” Moreover, he does not see how the scheme would be improved with two years’ delay, given there will teething and transitional problems no matter when the scheme commences. The 2010 timetable is “hard but achievable,” he says. There is also no case for Australia waiting for the likes of India and China to join us – we have the capacity and historical responsibility to go first, and developing countries will not proceed unless developed countries go first.

However, for Garnaut the most compelling reason for rapid action is that Australia stands to suffer more than most developed countries from climate change. Even with an ETS, the report says, Australia faces significant climate change impacts, and the costs and mechanisms of adaptation will be in a report later in the year. In particular, western Victoria, south-western Western Australia, rural South Australia and the Murray-Darling all face serious consequences of reduced rainfall and higher temperatures. As Garnaut noted today, in many Northern Hemisphere countries a rise of 2 degrees wouldn’t cause too much damage and might even be welcome.

In Australia, it will inflict massive economic, environmental and even social and cultural damage.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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