by Damian Carrington and agencies
Australia today pledged to cut its greenhouse gas emissions by 5%-15% by 2020 via the world's broadest cap and trade scheme.
Business analysts believed that industry overall would be relieved at the trimming of some of the costs to polluters but environmental campaigners condemned the deal.
The prime minister, Kevin Rudd, said the interim plan would not affect his commitment to slash the carbon emissions that are blamed for global warming by 60% from 2000 levels by 2050.
"Australia is today the biggest carbon polluter in the developed world on a per capita basis," Rudd said. "Yet we are the developed country with the most to lose from climate change."
He added: "Without action on climate change, Australia faces a future of parched farms, bleached reefs and empty reservoirs."
Australia's plan is only exceeded in scale by the European Union's emissions trading scheme. On Friday, European leaders committed the bloc to a 20% cut in greenhouse gases, relative to 1990 levels, by 2020. This would rise to 30% if the UN negotiations culminating in Copenhagen in December 2009 deliver a global emissions deal. The upper 15% cut in the Australian deal has the same trigger.
Both these targets fall short of the the cuts of 25%-40% by 2020 demanded by the scientists contributing to the UN's Intergovernmental Panel on Climate Change, in order to avoid a high risk of catastrophic climate change.
The Australian cut is relative to 2000 emissions levels, a tougher reference year than Europe's 1990. Rudd argued that his new plan exceeded the cuts in the EU plan in terms of the emissions reduced per capita.
The Australian government were caught in the same dilemma that faced Europe's leaders on Friday: the need to start cutting greenhouse gases very soon to prevent long term climate catastrophe versus the need to support industry and business in the short term during a deep and global economic downturn.
The government said the scheme would only trim about 0.1% off annual growth in gross national product from 2010 to 2050, with a one-off increase in inflation of around 1.1%.
"You could say that the decision came down to a choice between the environment and the economy and at this stage it looks like the economy has won," said Gary Cox, head of environmental derivatives at global brokers Newedge.
Green groups agreed. "The weak targets announced today will damage Australia's international reputation and hold back progress toward an effective international agreement [in Copenhagen]," Australian Conservation Foundation executive director Don Henry said.
Frank Jotzo, an Australian National University economist who specialises in climate change policy, concurred. "It's disappointing because it makes it very difficult, if not impossible, for Australia to come to the party of an ambitious international agreement," Jotzo said.
Australia's largest business group, the Australian Chamber of Commerce, said it remained apprehensive about being burdened with pollution reduction targets during the current economic slowdown.
But Rudd said the global economy could not excuse failing to act on global warming.
The details of the plan
• Permits to emit carbon dioxide will be auctioned by the government in the first half of 2010, raising an estimated A$11.5bn in 2010/11. This money will be used to compensate businesses and consumers for higher power and fuel costs. In future, the number of permits will be reduced, leading to reductions in emissions.
• Three-quarters of the nation's emissions will be regulated by the scheme. Billions of dollars are earmarked as compensation for the coal-fired power industry, which accounts for about 80% of Australia's electricity generation and about a third of national emissions. There are also major exemptions for companies that could lose business to overseas competitors which operate in nations that do not require them to buy carbon permits.
• Iron and aluminum producers, like BHP Billiton, Alcoa and Rio Tinto, will get up to 90% exemptions, while liquid natural gas producers, like Chevron and Woodside Petroleum, will get up to 60%.
• The price of the permits is set by the market. The government estimated an initial price of about A$25 (£11.10) a tonne, lower than the European emission allowances, which are trading around €15 (£13.50) a tonne. However, there will be a government-imposed cap of A$40 a tonne for four years, which puts a ceiling on the costs for industry but will undermine the use of carbon reduction technologies that cost more that $40.
• Transport and fuel are included in the scheme, but agriculture, responsible for 16% of the nations emissions, is exempt for at least five years. The government will introduce the carbon trading laws in 2009.
This piece originally appeared in The Guardian
Interestingly, while only one third of Australia's emissions come from domestic coal fired power plants, 75% of the coal Australia produces is actually exported, meaning that the CO2 emissions resulting from the coal they export is actually larger than their entire domestic emissions. We might want to consider exactly where the responsibility for emissions lies in such an arrangement. Surely you're responsible if you actually set fire to the stuff, but might there not also be some component of responsibility for extracting the combustibles to begin with?
Zane raises a point I hadn't thought of before.
I'm disappointed by the announced targets (feeling that this was why Labor was elected...), especially given the EU announcements of 20% cuts. It also comes on top of Melbourne's insipid 'road to nowhere' transport plan.
Still, it is a step in the right direction.
Let us hope that initiatives that come from this demonstrate that the economy god does not suffer as a result... then some real progress might be possible.