Saturday, July 05, 2008

Garnaut's strategy

The ANU professor would rather be right than popular.

He says when he worked with the former Prime Minister Bob Hawke in the 1980s to bring about the cuts in industry protection that have helped deliver our present prosperity he examined the opinion polls in order to find out what the public thought about protection.

“They loved it,” he told the Press Club yesterday.

“And those polls didn’t change as the Hawke government went about getting rid of protection.”

But he said people nonetheless respected the whole context of the reform program that the Hawke government was undertaking even if they felt it might hurt them.

That’s the sort of respect that he is asking the Australian people and the Opposition to give to the Rudd government now as it prepares to undertake a even more important task.

Back then he says the Opposition, in particular frontbencher Jim Carlton, was closely in touch and supportive, “and there’s no doubt that that was helpful to getting it right.”

Today the Opposition bleats about five cents a litre on the price of fuel.

After 14 months of inquiry and more than 4,000 public submissions the esteemed economist has found climate change to be “a diabolical policy problem - harder than any other issue of high importance that has come before Australia in living memory”.

The really hard part about it is the market mechanisms so beloved of economists won’t automatically solve it...

If every nation in the world said it wouldn’t cut its greenhouse emissions until others did, emissions wouldn’t be cut and every nation would be worse off.

That is what has been happening and why Professor Garnaut declared yesterday it was “too late to avoid major impacts”.

The only hope is statesmanship.

“What Australia does, does matter,” the veteran international negotiator declared.

“We have been punching above our weight on climate change for the last seven years. Any discussion of climate change policy in the United States over these years involves a lot more about Australia than about any other developed country. We were the reason why the Bush administration was say it was not alone amongst developed countries in not signing Kyoto. And that mattered.”

If Australia shows that it prepared to adopt worlds best practice in cutting greenhouse emissions and if it can guarantee that it will go even further as soon as China and India do so (most probably by legislating that our target of a 60 per cent cut would become a 90 per cent cut) we might be able to break the impasse.

We might be able to save our climate.


The author of the landmark Garnaut Climate Change Review has launched a
passionate defence of the importance of including petrol in Australia’s
proposed emissions trading scheme declaring that his report could be titled
“no pain, no rain”.

Outlining a grim future in which irrigated agriculture all but vanishes from
the Murray Darling Basin and in which an extra 4,000 Australians die each
year from heat Professor Ross Garnaut told the National Press Club yesterday
that most of it could be avoided if greenhouse gas concentrations could be
stabilised at 450 to 550 parts per million.

He said that Australia could best contribute to meeting that target by
adopting an emissions trading system that included petrol and charged for
permits rather than gave them away.

If the government were to cut petrol excise at the same time in order to
offset the scheme it would be sending “some funny sort of signal”.

“It would also contradict some of the messages that Australia and the
International Monetary Fund and many other countries are trying to send to
developing countries such as Indonesia and China, with traditions in all of
them of controlling petroleum prices.”

“We’re saying to them, rightly, you will be better off and the world would
be better off if you let prices rise by the full extent of the global price
rise, but we would blunting the effect on ourselves,” he said.

“Would a few cents cut off the price of petrol destroy this scheme? No. But
I don’t see any good reason to do it and you could give back that revenue -
even to motorists - in other ways.”

The draft report suggests that half the proceeds from the sale of pollution
permits be handed to low-income households, with the exact mechanism to be
considered by the Taxation Review being conducted by the head of the
Treasury Ken Henry.

The rest of the proceeds would be spent on encouraging the development of
low-emission technologies and compensating a limited number of
emissions-intensive trade-exposed firms whose exports would be hurt by the

“We’re suggesting that there should be a lot of
discipline in the application of that money. We have found that almost
every company in Australia claims to be trade exposed and emissions
intensive,” he said.

Prime Minister Kevin Rudd who commissioned the Garnaut Review while in
Opposition yesterday refused to endorse any of its suggestions saying that
it would merely be “one of a number of inputs into the government’s overall
decision-making process.”

The government will release its own green paper on emissions trading on
Wednesday July 16.

The draft Garnaut report unveiled yesterday included no specific emission
reduction targets or estimated increases in the prices of petrol or
electricity. Those numbers will be included in a supplementary report to be
released after the receipt of Treasury modeling next month.

Professor Garnaut told the Press Club that the modeling would show that the
extra increase in petrol prices that would flow from the scheme would be
tiny compared to the recent market-based increase.

“Think of the highest number that’s been part of the Australian emissions
trading discussion as applying over the next decade. Multiply that by a
large number and you don’t get anywhere near what the markets have done to
the petrol price anyway,” he said.

He appealed for bipartisan support for the scheme.

“If you don’t have bipartisanship, then there’s more risk you’ll make
arbitrary adjustments for political reasons.”

“Once you start making arbitrary adjustments, it’s not very easy to hold the
line against making more, and you could end up with a bit of a mess,” he said.