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John Quiggin

Real danger in solo action

John Quiggin Australian Financial Review

7 June 2007

After being stuck in limbo for a decade following the election of the Howard government, the key issues in the debate over climate change have been resolved with surprising speed over the past year.

A year ago it was evident that the political usefulness to the government of attacks on climate science had come to an end, and that the only feasible policy was to put a price on CO2 emissions either through a carbon tax or through a cap-and-trade system (Climate denial has had its day, AFR, 6/6/06).

Still, there was vigorous resistance. Delusional conspiracy theories that the whole body of climate science was a hoax orchestrated by environmentalists in search of world domination continued to get respectful treatment. The idea that the whole problem could be solved by technological innovation, wished into existence without any price incentive, remained official policy. And even when prices and trading were accepted, the idea of a target for emissions reductions remained beyond the pale.

Now, suddenly, everyone is agreed, at least in principle. Even The Australian newspaper, long a source of misinformation on all aspects of the problem has suddenly discovered that ‘the science of climate change has become more widely known and better understood’ and that emissions trading represents ‘the free market way to save the world’.

All that is left now are the disputes over targets and instruments that are the stuff of political business as usual. As always, such disputes produce lots of claims ranging from misleading to downright dishonest. The current fuss about the suggestion of a 20 per cent cut in emissions by 2020 shows all these characteristics, but also indicates that the government, and the PM’s Task Group have badly misunderstood the international environment.

The 20 per cent figure comes from two different sources. In 2005, when he was still a backbencher Peter Garrett suggested that a 20 per cent cut in emissions by 2020 would be a good target. More recently, EU countries have committed themselves to a 20 per cent cut relative to 1990 emissions also to be achieved by 2020. There’s a big difference between the two. It’s the latter proposal which has formed the basis of recent scare stories.

The PM’s suggestion that we could only meet the EU target by taking all cars off the roads and switching to nuclear power is wrong, though it’s the natural interpretation of the misleading way the issue was analyzed by the PM’s task group. Nevertheless, it would indeed be difficult for Australia to meet the EU commitment.

Under the Kyoto protocol, the EU committed to an 8 per cent reduction on 1990 emissions by 2012. Despite failures by some member countries, the EU as a whole looks likely to meet this goal. Furthermore, having gone through the task of setting up an emissions market, making plenty of mistakes along the way, the EU is well place to find the additional 12 per reduction implied by its target.

By contrast, Australia secured a target that allowed an 8 per cent increase in emissions and will meet this almost entirely through a once-off reduction in land clearing. So, to catch up with the Europeans we’d need a 28 per cent reduction, while, thanks to the lack of any real action for the past decade, our ‘business-as-usual’ trajectory is a 10 per cent increase.

But this raises an obvious question about the government’s position, which seems to have been overlooked. Having failed to ratify the Kyoto treaty, we will enter negotiations for arrangements after 2012 on the same basis as everyone else, namely 1990 emissions levels. As the Task Force has unwittingly pointed out, we are on the edge of giving away the benefits we fought so hard to get in 1997.

This is just one of a number of areas in which the Task Group and the PM, seem to have lost the international plot. The suggestion that we should not set medium term emissions targets until 2010 meets some obvious needs in terms of domestic politics. But the EU, Japan, India and China have all agreed to finalise post-Kyoto arrangements by the end of 2009. In all probability, they will be joined by a Democratic US Administration after the next US election.

The idea of pursuing an ‘Australian solution’ independent of the rest of the world, is a dangerous fantasy. Unless we ratify Kyoto as soon as possible, and rejoin the international mainstream, we risk finding that the rest of world has reached an agreement without us.

John Quiggin is an Australian Research Council Federation Fellow in Economics and Political Science at the University of Queensland.

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