Garnaut: the devil is in the detail

Professor Ross Garnaut has finally handed down his draft report, and for a young climate activist like myself, it leaves much to be desired. While I agree with his overall sentiment that Australia needs a massive wake-up call and must move quickly and strongly to reduce greenhouse pollution, the devil in the proposed emissions trading scheme design (ETS) is all in the detail.

My quick checklist for an effective emissions trading scheme is one that includes:

• a strong emissions cap aiming to halve Australia’s greenhouse pollution from 1990 levels by 2020;
• coverage of all sectors emitting greenhouse pollution, including transport (especially aviation);
• 100 per cent auctioning of emissions permits - no free permits to pollute to go to carbon-intensive industries;
• no compensation to industry, but assistance to low-income households to reduce energy;
• revenue from the trading scheme to go to energy efficiency, renewable energy, and public transport.

While Garnaut’s draft review didn’t touch on the level of the cap, it did canvass all the other areas on my checklist. Let’s see what Professor Garnaut had to say on some of these issues.

Coverage of sectors
Garnaut supports all sectors, including transport, stating “the more sectors included in the emissions trading scheme, the more efficiently costs will be shared across the economy”. True.

Permit Auctioning
Consistent with previous statements, his review supports 100 per cent auctioning of permits - but he has said that a “second-best option” could be to only start this auctioning in 2012. From 2010 to 2012 Garnaut says that under this second-best option, permits would “be released according to demand, rather than in line with the emissions reduction trajectory”.

This is problematic, because it means a very slow start to the ETS - the price of carbon would be fixed for the first two crucial years, at a lower price than what the market would set. The “reduction” target for these first two years would only be our Kyoto target - which is very weak - an 8 per cent increase in emissions over 1990 levels! It is important that an unconstrained ETS begin in 2010, so Australia’s emissions actually start decreasing, as soon as possible.

Furthermore, Garnaut’s plan for the money (see “revenue from the ETS” below) raised by the auction is not the best use of the money from a climate perspective. This leads directly to the next checkpoint -  revenue from the ETS and “compensation” to industry.

Revenue from the ETS
The review proposes that half the proceeds from the sale of all permits go straight back to households; about 30 per cent should go to structural adjustment needs (read: “compensation” to carbon-intensive industries for their reduced profits under the scheme); and the other 20 per cent should be allocated to research and development and the commercialisation of new green technologies like renewable energy and, controversially, the unproven and as-yet-not-commercially available carbon capture and storage.

Only 20 per cent to deploying and commercialising the technologies we need to solve climate change? That is simply not enough. More of this money should go to large-scale deployment of energy efficiency and renewable energy, as well as being used to create new green jobs so we have the people to do the work to save the climate.

And as for “compensation” - we’re talking about a fundamental economic transformation, and a switch to a new type of economy. Of course, some industries will need to be phased out - in a way that is fair to workers and communities rather than to the profit margins of industries which have refused to deal with the reality of climate change for years.

I look at this as being like a second industrial revolution - fundamental economic transformation - profit margins of heavy greenhouse polluters will of course go down. Indeed, that is the whole point of a cap and trade scheme: to decouple the link between greenhouse pollution and economic growth.