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.

Every dollar given to polluting industries is a dollar less that can go to greater energy efficiency and insulation programs for low-income households, or a dollar less for a new wind farm. In particular, money to assist low-income households is important, and should help these households reduce their reliance on fossil fuels, thus saving large amounts of money over time. This means energy efficiency programs and huge investments in public transport in outer suburban areas. Providing low-carbon alternatives gives permanent relief from rising prices and supports the scheme’s goal of reducing greenhouse emissions.

So now that we all have the draft report, how will the government respond?

There are, of course, a cacophony of voices responding to the report already. There’s a brilliant article titled “Garnaut followed by frog plague and death of all firstborns!” from Bernard Keane at Crikey! summarising the exaggerated claims that many carbon-intensive industries are making about the ETS. Even The Garnaut Climate Change Review acknowledges, in a very understated manner on page 14, that “some elements of the Australian resources sector have been especially vocal about the perceived threat that a price on carbon poses to their competitiveness and to Australian prosperity”.

The way you hear some industry bosses like Xstrata’s Peter Coates talking about the ETS, you’d think it was a bigger threat to Australia than climate change. Which clearly, it is not - climate change impacts are going to (and in many places, already are) hurting our economy far more than any ETS could.

Despite the “sky is falling in” claims of the polluter lobby, Kevin Rudd must keep his promises and act on the concerns of the Australian community.

We all know that the government’s promise to reduce Australia’s greenhouse pollution was one of the main reasons for its victory in the election. Now, the Opposition and polluting industry lobby - electricity generators, coal mining companies, and energy-intensive industries like aluminium and cement - are running a “scare campaign” against the ETS.

Industry lobbyists are urging the government to break or delay its promise to implement an emissions trading scheme by 2010, and are pushing for free permits to pollute for carbon-intensive industries. In the past few months, they have spent an enormous amount of time and money lobbying cabinet ministers and trying to influence the media debate on the ETS. The way The Garnaut Review is being reported and the way the debate turns is being influenced by their press releases, their comments, and their PR agencies.

In December last year, Kevin Rudd called climate change “the defining challenge of our generation” and promised the world that Australia was ready to assume its responsibility to reduce emissions.

The scare tactics over job losses are designed to obscure the fact that taking action on climate change will create hundreds of thousands of new jobs in green industries. Last week’s CSIRO’s report Growing the Green Collar Economy found that if Australia takes significant action to cut greenhouse gas emissions national employment will still increase by between 2.6 million and 3.3 million in the next two decades.

Similarly, the outcry about increased costs for business ignores the reality of how much our economy will suffer if we don’t reduce our emissions and runaway climate change hits us. When compared to these costs, taking action today is much cheaper. The Garnaut Review points out (page 15):

When assessments of the reasonableness of arrangements for trade-exposed industries are made, we should be mindful of the wider context. The highest possible obligations under an emissions trading scheme, at the top end of the range of possibilities for permit prices for the foreseeable future, would represent a small fraction of the resource sector’s increased revenue from higher export prices in recent years.

The Australian community pushed long and hard to place climate change at the top of last year’s election agenda. Two years in a row, hundreds of thousands of Australians turned out on to the streets for the “Walk Against Warming” rallies. And we still care. Last weekend’s Newspoll found that 61 per cent of Australians support an ETS.

For Kevin Rudd to delay, or decrease, the effectiveness of the ETS because of pressure from the polluting industries is a slap in the face for the millions of ordinary Australians who elected him on a promise of effective climate action. Australians know that reducing greenhouse pollution will change our economy; but they’re ready for those changes and they want leadership, not short-term populism.

The polluter lobby must not set the terms of the debate around climate solutions. Climate change is too important and the costs of inaction will affect every aspect of our economy and our lives.

Indeed, this is perhaps the section of the report that has been overlooked in the media discussion - how climate change will affect our lives. There’s a scary table on p.177-178 that summarises climate change impacts on Australia by 2100 with unmitigated climate change. Here are a few:

• 92 per cent decline in irrigated agriculture in the Murray Darling basin;
• catastrophic destruction of the Great Barrier Reed;
• snow-based tourism in Australia no longer viable;
• up to 35 per cent increase in cost of supplying urban water;
• significant risk to coastal buildings from increased storm events and sea-level rise - leading to coastal and flash flooding and extreme wind damage;
• up to 9,500 heat-related deaths in Queensland each year;
• 5.5 million Australians exposed to dengue virus;
• sea-level rise causing major dislocation in coastal mega-cities of Asia and small island states, leading to climate refugees.

As Garnaut says on page 2 of his epic 600-page report:

While an effective response to the challenge would play out over many decades, it must take shape and be put in place over the next few years. Without such action, if the mainstream science is broadly right, the Review’s assessment of likely growth in global greenhouse gas emissions in the absence of effective mitigation tells us that the risks of dangerous climate change, already significant, will soon have risen to dangerously high levels.