Australia Adviser Urges Cautious Carbon Targets

James Grubel, PlanetArk 8 Sep 08;

CANBERRA - Australia's top climate adviser on Friday recommended carbon be sold for an initial A$20 (US$16) a tonne from 2010, with only marginal increases for the first two years, to help business adjust to carbon trading in Australia.

In an updated report on targets for a trading scheme, academic Ross Garnaut said Australia should also aim to cut emissions by at least 10 percent by 2020, or up to 25 percent if the government adopts a tougher target.

Environment groups condemned the new targets as too low to help stop global warming, but business groups said Garnaut's targets were too tough and would be difficult to achieve without major breakthroughs in clean energy technology.

"A 10 percent national emissions reduction target by 2020 will be extremely difficult to achieve," said Mitch Hooke, from the Minerals Council of Australia, which represents Australia's major resource industries.

"Meeting this target without significant technological breakthroughs is akin to moving Australia to a candles economy."

Garnaut said the government should sell carbon permits at A$20 a tonne initially, with the price rising each year by four percent on top of inflation, until an open market would set the price of pollution from 2013.

Analysts said the recommended price was at the centre of current market prices for trades and would represent the penalty price for companies for exceeding their emissions limits, giving business some certainty in the early years of trading.

"The price is bang in the middle of our current price spread," said Gary Cox, head of environmental derivatives for Newedge Group in Australia. "On the screens right now the price is A$19 bid, A$22 offered, so the price is pretty reasonable."

He was referring to Australia's embryonic over-the-counter carbon market, which saw its first trade in May when energy group AGL Energy Ltd sold 10,000 Australian emission units to Westpac Banking Corp Ltd at A$19 per/tonne.

Since then about eight more trades have occurred at prices ranging from A$18 to A$21.50 a tonne.

Australia's centre-left Labor government has promised to introduce carbon trading from July 2010 to help the country cut its carbon emissions, but has come under attack from companies that say the scheme could drive some firms out of business.

The government, which has made the carbon scheme a central plank of its policy, says it is willing to negotiate with business and has said Garnaut's report is only one source of advice.

"We respect his advice, we'll listen to his advice, but ultimately it is for government to make its decisions on these matters," Climate Change Minister Penny Wong told reporters.

Australia's expanded carbon trading system will cover 75 percent of the economy, and 1,000 of Australia's biggest companies, with hefty initial subsidies for big polluting firms to help them adapt.

The country is the world's 16th biggest carbon polluter and produces about 1.5 percent of global emissions. But Australia is the fourth largest per-capita emitter, with five times more carbon pollution per person than China.


A NEW KYOTO

World environment ministers and negotiators will meet in Copenhagen in late 2009 to try to work out a new agreement on how to curb global emissions, to come into force after the initial phase of the Kyoto Protocol pact expires in 2012.

Garnaut, who was asked to advise the government on the costs and impacts of climate change and carbon trading, has proposed two models for Australia's targets, based on a strong aspirational target from Copenhagen, and a softer target.

Garnaut said Australia should push for the new agreement to set a strong target to limit worldwide carbon dioxide emissions to 450 parts per million in the atmosphere, although a limit of 550 parts per million were more achievable.

Global atmospheric CO2 concentrations are about 390 ppm compared with pre-Industrial Revolution levels of about 280 ppm.

Under the stronger aspirational target, Australia would need to cut its emissions by 25 percent by 2020, and 90 percent by 2050, based on levels from the year 2000. Gross domestic product would then be 1.6 percent lower than it would be in 2020 if the government took no action to cut emissions.

Under the more practical target of 550 parts per million, Australia would need to cut emissions by 10 percent by 2020 and 80 percent by 2050, with gross domestic product to be only 1.1 percent lower than it would otherwise be in 2020.

Centre-left Labor government's target is to cut emissions by 60 percent of 2000 levels by 2050.

Garnaut said Australia should set its own target of a five percent cut in emissions by 2020 if talks in Copenhagen fail to reach a global deal.

The Australian Greens, who share the balance of power with two independents in the upper house Senate, said the government needed stronger targets than Garnaut recommended.

"The weak targets ... released today are based on outdated science, risk catastrophic climate change and will undermine global negotiations towards an effective climate treaty," Greens leader Bob Brown said.

(US$1=A$1.22)

(Additional reporting by Rob Taylor and Bruce Hextall and David Fogarty)

FACTBOX - Impacts of Australia Emissions Trade
PlanetArk 8 Sep 08;

CANBERRA - Australia's top climate adviser on Friday recommended cautious targets to start carbon emissions trading, with carbon priced at A$20 (US$16) a tonne beginning in 2010 and emissions cut between 10 and 25 percent by 2020.


Academic economist Ross Garnaut, dubbed Australia's equivalent of British climate adviser Nicholas Stern, makes a final report to the government on Sept. 30.

Following are the impacts two regime scenarios would have by 2020 under "practical" and "aspirational" targets set by Garnaut using official Treasury Department modelling. The centre-left government will respond later in 2008.

* Carbon emissions permit price set at A$20 a tonne from 2010, rising by 4 percent a year above inflation until 2013. Market demand will then drive the price.

* The most likely "Practical" scenario sees emissions cuts, accompanied by concerted global action, of 10 percent by 2020, lowering Australian GDP by 1.1 percent and reducing consumption by 1.8 percent. The price of carbon would rise to A$34.50 in present dollar terms.

* The tougher "aspirational" scenario sees emissions cuts of 25 percent by 2020, lowering GDP by 1.6 percent and reducing consumption by 2.4 percent. The price of carbon would rise to A$60 in present dollar terms. Garnaut says this scenario is unlikely given current world sentiment on climate change.

* A third weakest scenario, seen in the event of a collapse of global climate talks on a post-Kyoto climate deal in Copenhagen in 2009, would see unconditional cuts by Australia of 5 percent by 2020. This offer would lower GDP by 1.3 percent and consumption by 1.6 percent. The price of carbon under this scenario would be driven higher because of global trading instability, rising to A$52.60.

(US$1 = A$1.22)

(Reporting by Rob Taylor; Editing by David Fogarty)

FACTBOX - Greenhouse Gas Curbs, From Australia to India
PlanetArk 8 Sep 08;

The following factbox compares national goals for fighting climate change, from the United States to India, after Australia's top climate adviser proposed 2020 greenhouse gas emissions targets on Friday.

The data compares the widely varying plans with a 1990 base year in the UN's Climate Convention and its Kyoto Protocol for curbing emissions, mainly from burning fossil fuels.

The 37 nations bound by Kyoto have agreed to consider cuts of between 25 and 40 percent below 1990 levels by 2020, a range indicated by the UN Climate Panel as needed to avoid the worst of droughts, floods, heatwaves and rising seas.

Almost no governments have set such tough goals. Developed nations pledged last year to make "comparable" efforts:

AUSTRALIA - Climate Change advisor Ross Garnaut called on Friday for cuts of at least 10 percent, and up to 25 percent, in 2000 emissions by 2020. "Under Kyoto accounting rules Australia's emissions were almost the same in 1990 and 2000," his report says. The centre-left government already aims to cut emissions by 60 percent below 2000 levels by 2050.

UNITED STATES - President George W. Bush in April set a 2025 peak for US emissions, by when US emissions are likely to be about 30 percent above 1990 levels. Bush's likely successors want far tougher goals. Democrat Barack Obama favours cutting US emissions by 80 percent below 1990 levels by 2050. Republican John McCain aims to cut to 1990 levels by 2020 with a 60 percent cut below 1990 levels by 2050.

EUROPEAN UNION - EU leaders agreed in 2007 to cut emissions by 20 percent below 1990 levels by 2020, and by 30 percent if other nations make similar cuts. That implies a 14.2 percent cut from 2005 levels by 2020, according to the European Commission. EU leaders want rich countries to aim to reduce emissions by 60 to 80 percent by 2050, compared to 1990.

JAPAN - Tokyo plans to cut greenhouse gas emissions by 60-80 percent below 2005 levels by 2050, implying a cut of about 14 percent by 2020 from 2005. That would put emissions about 4 percent below the 1990 Kyoto benchmark by 2020.

CANADA - The government's "Turning the Corner" plan seeks to cut emissions by 20 percent below 2006 levels by 2020 and envisages cuts of 60 to 70 percent below 2006 by 2050. Applied to the usual Kyoto 1990 benchmark, a 20 percent cut from 2006 would put emissions 2.7 percent below 1990 levels by 2020.

NORWAY - Aims to cut emissions by 30 percent from 1990 levels by 2020 and to be "carbon neutral" by 2030, when any emissions will be offset by cuts elsewhere.

NEW ZEALAND - Aims to be "carbon neutral" in the total energy sector by 2040.

SOUTH KOREA - The government plans next year to set a 2020 target to curb rising emissions. South Korean currently has no obligations for curbs under the Kyoto Protocol.

DEVELOPING NATIONS

CHINA - The government's 2006-10 plan aims to reduce energy consumption per unit of gross domestic product by 20 percent, curbing the rise of greenhouse gas emissions. Beijing also plans to quadruple gross domestic product between 2001 and 2020 while only doubling energy use.

INDIA - New Delhi says priority must go to economic growth to end poverty while shifting, under a national action plan unveiled in June, to clean energies led by solar power. The government is setting no greenhouse caps but says per capita emissions will never exceed those of developed nations.

SOUTH AFRICA - The government aims to brake rising emissions and offers a scenario under which emissions will rise until 2020-25, stay flat for up to a decade and then fall. It will set mandatory energy efficiency targets and a shift away from coal.

COSTA RICA - Aims to cut its net greenhouse gas emissions to zero by 2021, the 200th anniversary of independence.

BROADER SOLUTIONS

THE KYOTO PROTOCOL - A pact binding all rich nations except the United States to cut emissions on average by 5 percent below 1990 levels by 2008-12.

GROUP OF EIGHT - Leading industrial nations agreed at a G8 summit in Japan in July to a "vision" of cutting world emissions of greenhouse gases by 50 percent by 2050.

GLOBAL - About 190 nations agreed at a meeting in Bali, Indonesia, in December 2007 to work out a treaty by the end of 2009 to succeed Kyoto, comprising deeper emissions cuts by rich nations and action by poor countries to slow rising emissions.

-- For Reuters latest environment blogs click on: http://blogs.reuters.com/environment/ (Compiled by Alister Doyle in Oslo, Editing by Anthony Barker)