CANBERRA OBSERVED: News Weekly
The economic costs of the Garnaut Report
, July 19, 2008
Mr Kevin Rudd's life as prime minister will depend on his response to Professor Ross Garnaut's report on climate change.
Professor Ross Garnaut was at least honest enough to admit he had delivered the Rudd Government a "diabolical" policy problem when he presented his long-awaited review on climate change recently.
There was less objectivity in the dire predictions of a 97 per cent loss in agricultural production for the Murray-Darling Basin by 2100, and warnings about obliteration of Australia's natural tourist attractions.
"With unmitigated climate change, on the basis of the mainstream science, we won't have much, if any, of the Great Barrier Reef, of Kakadu," Professor Garnaut told the National Press Club on the day he released his review.
Even if those predictions turn out to be true, it is difficult on the face of it to see how Australia - with its 1.5 per cent contribution to the world's greenhouse problem - could actually reverse such a catastrophe.
Developing countries - which are unlikely starters to make drastic cuts to their own emissions - are expected to be responsible for 80 per cent of emissions growth over the next two decades alone.Australia to lead the way
But Professor Garnaut says Australia must become a leader in switching to a low-carbon economy through an emissions-permit scheme designed to punish financially businesses which pollute.
Having gained the high moral ground, Australia would then be in a position to urge other countries to follow.
The logic sounds eerily like the arguments mounted in favour of Australia leading the world in trade liberalisation - a policy which has driven tens of thousands of families off the land and lowered the living standards of those who remained, but which has failed spectacularly to encourage others to follow Australia's example.
Professor Garnaut conceded that one of the biggest risks to his proposals was "carbon leakage" where Australia's carbon emissions are simply exported to other countries which lack the same rigorous code on emissions.
This would subvert all the good work done in Australia for no gain either to Australia or the environment.
Professor Garnaut's long-range predictions were labelled as unhelpful "chicken little" scenarios by New South Wales Treasurer Michael Costa. Mr Costa realises that Garnaut's "solutions" would wipe billions in value off the power-generation assets which the NSW Labor Government is trying to sell to bail itself out of trouble.
But many other large businesses are waking up to the potential costs as well. The political problems Professor Garnaut has foreshadowed are immense and pervasive and potentially far greater than those created by the decision to open Australia's economy in the 1980s or to introduce a new tax system in the 1990s.
Professor Garnaut argues that putting a "price" on carbon will then force people to change their ways either through lower energy use or cheaper renewable alternatives.
But many are locked into their current energy use and standards of living and will simply have to pay more for energy.
The biggest losers under an emissions scheme would be the poor, and Professor Garnaut recommends compensation - half of the money raised from the permit system.
Low-income households and those living in the outer suburbs and fringes of cities spend a greater proportion of their income on electricity and petrol, and emissions-trading will force up prices for both.
The rest of the revenue raised will be divvied up between compensating affected businesses (30 per cent) and investment in alternative energy (20 per cent).
But Professor Garnaut thinks there should also be compensation for some industries - but within strict limits. Already businesses are lining up to put their hands out for compensation.
Professor Garnaut also wants petrol included - with no compensatory cut to fuel excise. After making such a huge deal out of FuelWatch, Mr Rudd is probably likely to somehow exclude petrol, or work around it initially.
The Rudd Government will produce its own response to the climate change dilemma shortly when it presents its own "green paper", but has already declared it wants to make Australia play a major role in reducing the amount of carbon the world produces.
It also wants to continue with its ambitious task of having an emissions scheme in place by 2010.
But it is faced with a flight of businesses and factories offshore, higher inflation, and a disgruntled public who will quickly see through the unlikely benefits to the environment from the pain they will be asked to endure.
But Mr Rudd is now locked in to the job of "doing something" significant on climate change.Economic suicide
The Opposition is backing an emissions scheme, but has realised there are more votes in being cautious rather than being more ambitious than the government. Hence, Dr Nelson has already declared it verging on economic suicide for Australia to volunteer to take the first step.
"For Australia to go it alone, well in advance of the rest of the world, will do irreparable damage to our economic future and not do a darn thing to address climate change and an environmentally sustainable future for the planet," Dr Nelson said.
Mr Rudd's life as prime minister will depend on his response to Professor Garnaut's report.