The Road to Durban: Australia’s 5% Pledge Tops the EU and USA

Prior to the United Nations climate change negotiations in Cancun, pressure was put on the Government to increase Australia’s greenhouse gas emission pledge from achieving 5% below 2000 levels by 2020 to a very challenging 10% or even 25%.

While there has been a some positive outcome from Cancun, Minister Combet’s decision to reject the calls has been franked by the failure in Cancun to deliver a robust legally-binding international agreement.

After Copenhagen, Australia signed into the now defunct Accord its conditional pledges. The relevant part of Australia’s pledge under the Accord was “… to unconditionally reduce Australia’s emissions by 5 per cent on 2000 levels by 2020, and to reduce emissions by up to 15 per cent by 2020 if there is a global agreement which falls short of securing atmospheric stabilisation at 450 ppm CO₂-e, and under which major developing economies commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia’s.” This pledge will now be transcribed into the Cancun agreement.

First, there can be no suggestion that the pledges, now given some legitimacy in Cancun, will go anywhere near meeting the 450ppm condition. The IPCC suggests that, for this condition to be met, global emissions would need to peak around 2020.  The International Energy Agency as recently pointed out that peaking earlier that 2030 is not likely.

Second, the major developing economy pledges are subject to overriding economic growth and poverty reduction requirements, and are characterised as “best endeavours”. Many are expressed in terms of a reduction in emissions intensity greater than business-as-usual. None of these countries has yet pledged, let alone committed to, when their emissions might peak.

Finally, what of the condition that advanced economies take on commitments comparable to Australia’s? Nothing in the Cancun outcome is a commitment, but leaving that aside, is Australia’s 5% pledge asking Australian’s to do “no more and no less”, as the former Prime Minister put it, than say the EU or the USA, the citizens of which I expect Australians would compare themselves with?

The measurement of “comparable effort” among countries is of course complex. Minister Combet prior to Cancun suggested emission reduction per capita as one measure.  As the Minister’s numbers showed, based on this metric Australia’s 5% pledge, which equates to a 34% reduction in per capita emissions by 2020, more than matches the EU’s 20% pledge that delivers only a 24% reduction.

Another more important measure is the estimated loss of Gross National Product associated with mitigation action. As Minister Combet pointed out prior to Christmas, finding an appropriately balanced outcome in the international negotiations involves a very considered appraisal of the distributional economic impact of carbon pollution reductions pledged by each country.

Treasury modelling undertaken for the Government prior to Copenhagen showed that Australia’s 5% pledge would result in Australians paying three to fours times more than the Europeans and the Americans by 2020. Similar modelling by Access Economics last year for the Australian Industry Greenhouse Network found that the 5% pledge would be asking Australians to pay US$785 per capita per year by 2020. On the other hand, Americans would be paying around US$350 per capita and the Europeans just US$185 each for the same environmental outcome - hardly fair on Australians.

Importantly, the modelling demonstrated that, because of every country’s national circumstances, simple comparisons of the percentage level of the pledge, in this case 5% for Australia versus, 17% for the USA and 20% for EU, is a very poor indicator of comparable effort. If the metrics were that easy, the negotiations would have been over years ago.

It is very important for the public to be aware that the policy debate is not just about the Multi Party Climate Change Committee fashioning a carbon pricing scheme to replace the many existing inefficient measures Australia has, not least being the Renewable Energy Target scheme. Everyone also needs to be aware of the absolute level of the cost burden that would be introduced to the economy via the commitments made by Australia on the international stage.

While there are certainly positives from Cancun, the outcome has not resulted in major developing economies committing to substantially restrain emissions, and Australia’s 5% pledge goes well beyond the offers of the EU and the USA.

There is no evidence yet that would support Australia going beyond 5% in Durban next year.