## Australia Sets Target of 5-15% Carbon Reduction by 2020, Announces 2010 Carbon Market

##### 22 December 2008

by Jack Rosebro

 Business-as-usual trajectory and 2020 target trajectories for greenhouse gas emissions, 2005-2020. Click to enlarge.

Australia’s politicians, business groups, environmentalists, and citizens are debating the country’s first proposed carbon reduction and trading plan White Paper[1], which was announced by Prime Minister Kevin Rudd last week.

The plan calls for a reduction of greenhouse gas (GHG) emissions by 5% to 15% below year 2000 levels by 2020, with the 15% cut occurring only “in the context of global agreement under which all major economies commit to substantially restrain emissions and advanced economies take on reductions comparable to Australia.[2] Australia’s long-term GHG emissions reduction target is 60% below 1990 levels by 2050.

Rudd asserted that the White Paper’s targets are more ambitious than those recently agreed to by the European Union (earlier post). “The EU’s 20% target... is equal to a 24 percent reduction in emissions for each European from 1990 to 2020,” said Rudd. “Our five percent unconditional target is equal to a 27 percent reduction in carbon pollution for each Australian from 2000 to 2020, and a 34 percent reduction for each Australian from 1990.[3]The Government believes it has got the balance right,” Rudd remarked.

The Prime Minister’s mathematics reflect future emissions per capita, rather than total emissions, and is dependent on projected population changes. Australia’s population is expected to grow by 45% from 1990 to 2020, while Europe’s population is projected to remain flat within the same period of time.

The White Paper follows The Garnaut Climate Change Review (earlier post), which was released earlier this year. The Rudd government has come under heavy criticism for proposing emissions targets as well as a carbon trading scheme that are divergent from the recommendations of the Review, which had found that a transformation of Australia’s energy sector and an aggressive carbon trading market would be necessary if Australia were to contribute meaningfully to global greenhouse gas reduction targets.

Already one of the hottest and driest developed countries, Australia is projected to suffer significant losses from the effects of climate change over the next century, culminating in a collapse of agriculture by 2100, if greenhouse gas emissions do not peak before 2025 and then drop sharply by 2050.

Prior to the release of the White Paper, the Government had signaled that its emissions targets would not match the 25% cut in Australian greenhouse gases by 2020 that were recommended by the Review. During a side event at the UNFCCC Conference of Parties last week in Poznań, Poland, Lord Nicholas Stern stated that it would be “worrying” if Rudd accepted anything less than the emissions targets set out by Dr. Garnaut. Stern, a former chief economist of the World Bank, was the chief architect of the 2007 Stern Review on the Economics of Climate Change (earlier post).

The Garnaut Review, which was modeled in part on the Stern Review, nevertheless concluded that in light of subsequent science, Stern had underestimated the risks of inaction with regard to climate change, an assessment with which Stern has since agreed. Rudd’s plan was also criticized Saturday for its lack of ambition by Garnaut himself, upon whose recommendations the plan, in part, ostensibly rests.

The white paper rules out Australia contributing to a global effort to achieve ambitious mitigation targets before 2020,” wrote Garnaut in an essay titled “Oiling the Squeaks”, published in the Sydney Morning Herald.[4]That is a pity. There is a chance, just a chance, that... high ambition at Copenhagen will turn out to be feasible.

Opposition climate change spokesman Greg Hunt said Rudd had “shamelessly” set up expectations that he would take tough action. However, Climate Change Minister Penny Wong defended Rudd’s plan, terming it “transitional assistance until there is a global carbon constraint.

The Carbon Target

 “It’s about the impression of activity, clothing it with a moral purpose and then the failure to deliver practical action... He’s not the Messiah when it comes to climate change, he’s just a very naughty boy and he set those false expectations.””—Australia Opposition Leader Greg Hunt

Although GHG emissions reduction discussions have most commonly referenced year 1990 as a baseline from which to measure real and anticipated increases or decreases in GHGs, some countries are shifting their baselines to year 2000. As such a shift would substitute a higher emissions baseline, it would therefore raise the amount of total emissions that would nevertheless achieve a given percentage-based reduction, as compared to the original baseline.

However, Michael Raupach from the Centre for Australian Weather and Climate Research noted that as Australia’s greenhouse gas emissions have already risen 15% since 2000, the government’s target of a 5% reduction from 2000 levels actually means a 20% reduction in greenhouse gases from current levels. “The targets are very challenging,” he said. Dr. Raupach said the amount of atmospheric carbon dioxide—almost half of all carbon dioxide in flux on Earth—was increasing, while the carbon uptake of oceans was decreasing (earlier post).

The Carbon Market

 “Never in the history of Australian public finance has so much been given without public policy purpose, by so many, to so few.”—Dr. Ross Garnaut, on Australia’s proposal to give free carbon permits to heavy polluters in the first years of the carbon trading scheme

Plans for an Australian carbon market beginning in 2010 envision trading in which companies are free to produce greenhouse gases without limitation as long as they hold enough carbon permits. The market will involve a thousand of the country’s largest GHG producers, and will initially include the granting of 90% of needed permits to companies that produce more than 2000 tonnes of carbon per A$1 million in revenue, and 60% of needed permits to companies that produce more than 1,000 tonnes of carbon per A$1 million in revenue. The plan will also exempt the agricultural sector from carbon trading until 2015.

 Value of free carbon permits to be granted to 30 companies operating in Australia in 2015. Source: Innovest. Click to enlarge.

In remarks to the Canberra Times,[5] Garnaut noted that the White Paper indicates that “the rate of return from [business] lobbying has been very high.” Rudd’s plan would give emissions-intensive, trade-exposed (EITE) industries such as coal mining companies, as well as coal-burning power generators, free permits to pollute when Australia’s carbon market opens next year. “I don’t think there’s any case for giving 3.9 billion dollars [AUS] to coal-based generators,” Garnaut stated, likening such protection to the US Smoot-Hawley Tariff Act of 1930, which triggered a trade war with Europe.

 Percentage of foreign and domestic companies operating in Australia and scheduled to receive carbon assistance, 2010 and 2015. Source: Innovest. Click to enlarge.

The Garnaut Review had warned against payments or free carbon permits for EITE industries, warning that “while payments... to avoid ‘carbon leakage’ is justified in principle, their application raises dreadful problems.” The Australian government plans to release draft legislation for carbon trading by February, and introduce the legislation into Parliament by May.

[1] Carbon Pollution Reduction Scheme: Australia’s Low-Pollution Future
[2] Australian Government, Australia’s National Emissions Target: Fact Sheet. December 2008
[3] Australian Prime Minister Kevin Rudd, Australia’s Low-Pollution Future. Speech delivered at National Press Club, Canberra. 15 December 2008
[4] Dr. Ross Garnaut, Oiling the squeaks. The Sydney Morning Herald, 20 December 2008
[5] (5) David Alexander, Garnaut angered by Rudd’s lack of ambition. The Canberra Times, 20 December 2008