Driven by the remorseless logic of what is achievable internationally and that it is too late to avoid substantial impacts on Australia from climate change, the Garnaut Review today recommended a low emissions reduction target — one that is heavily dependent on an international agreement to achieve a dangerously high level of atmospheric carbon.

Declaring that Australia should establish its emissions reduction framework on an atmospheric carbon level of between 450-550 ppm, Professor Garnaut recommended a set of moderate options likely to have minimal impacts on the Australian economy in the event no international agreement can be reached next year on what will follow the Kyoto Agreement.

An initial fixed carbon price. Garnaut wants an emissions trading scheme to kick off in 2010 with a carbon price of $20 per tonne, rising each year by 4% plus CPI.

From 2013, the role of an international agreement becomes crucial. Garnaut recommends that Australia advocate, and be willing to sign up to, an international agreement based on stabilising atmospheric carbon levels at 450ppm.

However in Garnaut’s view, an international agreement on 450ppm isn’t going to happen — one at 550ppm is more likely, and probably the first step toward, eventually, 450ppm. Under such an agreement, Australia would aim to reduce its emissions by 10% on 2000 levels by 2020, and 80% by 2050. 450ppm would require a 25% reduction by 2020.

In the absence of any international agreement of any kind — which Garnaut described as “not a good world to be in” — he recommends aiming for a 5% reduction by 2020.

A “waiting game” option, the lowest of the lot, would simply keep the 2012 carbon price, inflated by 4% plus CPI.

The costs of these options is shown here (LINK ) and demonstrates the importance of an international agreement. Notice the carbon price under the 5% option, in the event there’s no international agreement — $52.60 a tonne in 2020.

But the cost of carbon under the 10% option if there’s an international agreement is far lower — $34.50 — because even though there’s fewer permits available, there’s also the opportunity for Australian businesses to trade permits internationally.

In fact, the 450ppm option under an international agreement (25% reduction) is not significantly more expensive than a 5% reduction.

As we discussed earlier this week (Crikey, Wednesday, item 1 “Garnaut target falls desperately short“) and as Garnaut himself readily acknowledged today, even the 550ppm target countenances the destruction of the Great Barrier Reef and other iconic features of the Australian environment.

Even 450ppm would see significant wildlife extinction levels. Garnaut indicated that he thought there was a case for 400ppm, but that it was simply impractical internationally. His final report at the end of the month will contain several chapters on adaptation, because in his view Australia is too late to avoid “substantial impacts” which will, as he said in his dry economist’s tone, require “major adaptation.”

Garnaut had discussed his targets with Nicholas Stern, he told this morning’s briefing. Stern had indicated he thought the targets were appropriate for Australia, and that we’re crucial in forging an international agreement given most of the biggest emitters — China, India, Indonesia — will be in our region.

You can bet Kevin Rudd will thinks the targets are appropriate too. They’re so low that even Rudd and Penny Wong will find it difficult to undercut them. And they should also leave the Opposition without much room to go backward — this is more or less the Greg Hunt-Malcolm Turnbull position converted into numbers.

It’s all, to be blunt, profoundly depressing stuff.

Garnaut has explained with logic and clarity why we’re in serious trouble on climate change and unlikely to get out of it, even if a reasonable international agreement is forged.

The only small positive comes in the GDP figures in the costs table. Have a look at the comparative GDP impacts of the 5% option — where we go it alone — and the 25% option, under an international agreement — it would only cost us an additional 0.3% of GDP to aim higher, in the event some sort of international agreement is struck. Addressing climate change, Garnaut says, costs about 0.1% of GDP p.a., until we reach a tipping point in the future where the damage from climate change outweighs the costs to GDP of a carbon price.

If Copenhagen or subsequent meetings manage to produce an agreement, even around a dud figure like 550ppm, there’s a strong case for Australia to aim itself for 450 and even 400, given the overall cost impact will, over the course of a decade, be barely noticeable.

Peter Fray

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