Friday, June 06, 2008

Garnaut - the high petrol price is doing us good

The man conducting the government’s climate change review has welcomed the recent increases in oil prices saying they will make it easier for Australia to meet its Kyoto obligations.

Delivering the sixth annual Heinz Arndt Memorial Lecture at the Australian National University last night Professor Ross Garnaut said that while community concern was focused mainly on petrol and diesel prices, higher gas and coal prices were also beginning to push up the prices of other forms of energy.

As a result Australians would cut their use of fossil fuels faster than they would have, making it likely that Australia would overshoot the target for emission reductions it agreed to reach under the Kyoto Protocol by 2012.

“If we had been more or less in line with the Kyoto requirements before, we will now be tending below,” he told the Canberra audience.

This meant that the emissions trading scheme that Australia is to adopt from 2010 need not start with a high carbon price as had previously been thought.

Instead it could start with a low fixed price for the first two years...

...and only later move to prices freely set at auctions, after 2012 when tougher post-Kyoto emissions targets came into force.

Professor Garnaut put forward the idea as a “purely transitional measure in the start-up period”.

He said he would be discussing the merits of the idea in detail in his draft report to be released on Friday July 4.

It would allow the carbon trading system to be tested for two years for two years before the price of carbon went ‘live’ in 2012.

Professor Garnaut’s idea also has the advantage of presenting the recent increases in petrol and other energy prices as part of the solution to climate change, bearing a burden that would otherwise be born by a carbon tax in the form of an emissions trading system.

He remains a strong believer in including all transport fuels including petrol in Australia’s emissions trading system.

The Department of Climate Change is preparing a green paper on the proposed design of Australia’s emissions trading system in parallel with the Garnaut report, also due for release in July.

The government wants to publish the draft legislation that will set up the scheme by the end of the year.

Professor Garnaut told the audience that while it was terribly difficult - indeed impossible - to accurately measure all of the costs and benefits of attempting to mitigate climate change there was no alternative but to try.

“And regrettably there is no alternative to acting on the results of that analysis now, actively or passively, as the passage of time is rapidly reducing the scope for choice.”.

Referring to “skeptics” who doubted the broadly accepted science of climate change, he said that it was sometimes agued “that Galileo turned out to be right as a minority of one against the intellectual establishment”.

“Does not this establish that the intelligent dissenter can be right?” he asked rhetorically.

“Yes, it does. But the establishment of seventeenth century Catholic Europe was not learned in scientific method. Would not Galileo be with the majority of established science today? Probably.”

“Mainstream science is right on a balance of probabilities.”

Professor Garnaut said there was a chance, “just a chance, that Australia and the world will manage to develop a position that strikes a good balance between the costs of dangerous climate change and the costs of mitigation.”

“The consequences of the choice are large enough for it to be worth a large effort to take that chance,” he said.