Back in December, shortly after the election, a couple of us from Christine’s office went to see Professor Garnaut speak at ANU. We wanted to get a feel for how this man – who would now be so important – saw the big and small picture questions of climate change.We’ve copped a bit of flak here on the blog since then for telling it how we saw it: Garnaut, back then, did not seem to get it. He did not get the urgency of the issue, he was not up to speed on the science, he even extraordinarily suggested planting biofuel crops across Northern Australia’s carbon- and biodiversity-rich savannah.
In recent weeks, we’d been pleased to hear reports that Garnaut had been on a steep learning curve, and was now swiftly familiarising himself with the science. That much, and much more, was clear from the interim report he released last week. [As noted in a recent post, at this rate, come June he'll be spruiking complete decarbonisation!]
As Garnaut acknowledges, the interim report is a very early stage of the process. There is much still to be bedded down in terms of both top-level issues such as targets and detail of the proposed emissions trading regime and the policies that will have to surround and support it. It also exhibits all the signs of a messy draft, with some sections appearing to have been written at a different time from others, with substantially different, and in some senses contradictory, commentary on both the science and politics of the issue. But, as a statement of direction, it is encouraging.
At the most general level, the interim report makes two clear points that the Greens and others have been arguing for some time: firstly that substantial emissions reductions do not mean economic catastrophe, and secondly that emission reduction targets must be guided by the science. It is to be sincerely hoped that the strong statements on these issues will guide not only the Government, but also the public debate, which is still frequently fixated on the belief that cutting emissions risks crashing the economy, and thus targets need to be as small as we can get away with. In fact, the science says the cuts need to be as large as possible – heading towards complete decarbonisation as fast as is technically feasible – and the economic task is to work out how to get there most efficiently.
The summary of the science in the paper is generally good, in that it accepts the findings of the IPCC, although it is troubling that the paper deems it worthwhile to mention the critiques of the IPCC that say it overstates the threat, but not those that say it is conservative. For such critiques, I do encourage people to read the recent work of NASA’s Jim Hansen, who concludes that the IPCC is too conservative and that the interpretations of its data for policy are far more conservative still.
The latter is particularly important for Garnaut and others to understand: once you accept the science, you need to make a judgement call on how much climate risk you are willing to carry. Garnaut, the UNFCCC at the Bali Conference, and many others, seem willing to accept the 50% chance of breaching 2C warming that comes with stabilisation of carbon at 450ppm of CO2e in the atmosphere. It should be obvious that this is unacceptably high.
More troubling, though, is the suggestion that Garnaut is still seriously looking at stabilisation scenarios including 550ppm of CO2e – a scenario that carries such a high risk of exceeding 2C (not quantified in the interim report, but Meinshausen puts it at 63 - 99%) that it should simply not be considered. Garnaut acknowledges the high risk of such a scenario, but he does not rule it out. He also relies heavily, particularly for the lower stabilisation scenarios, on a strategy of overshooting the target and rapidly pulling emissions back down again. While this strategy may be the only way to eventually stabilise below 400ppm for example (because we are already close to that level and certain to exceed it) overshooting is a risky approach because no-one really knows how the climate will respond to short periods of higher concentrations.
In looking at the impacts of climate change on Australia, Garnaut makes a good point that is rarely raised in Australia: that impacts on us are not limited to impacts in Australia, disastrous though they may be. In addition, we need to take into account the very substantial impacts on countries in our region, including China and India, and the flow-on effect to us of major economic, social and humanitarian impacts on our major trading partners, for example.
Putting all this together, Garnaut makes the point that “it is in Australia’s interest to seek the strongest feasible global mitigation outcomes – 450ppm”. We would argue that it is Australia’s interest to go further and that Garnaut’s justification for his target, the claim that “peaking of global emissions in the near future, followed by very rapid falls, is clearly not feasible” is a contestable point, not a statement of fact. But, that said, this is an important first step to have taken.
Garnaut’s suggestion that we join together in a regional partnership with PNG and Indonesia is explicable firstly because of his long personal and professional connection with PNG. But, secondly, it is quite a cynical grab for cheap emissions reduction credits. Leaving aside arguments about carbon imperialism, given the tremendous global focus on the issue, it seems highly unlikely that Indonesia and PNG would allow Australia to make dibs on these credits if they have the option of selling them on the global market to a higher bidder. Perhaps more fundamentally, there is good reason to question how robust and trustworthy emissions credits from avoided deforestation are. Given the weak governance and difficulty of enforcing protection of forests, illegal logging can easily bring the whole thing undone. Australia would carry a significant risk by relying to a great degree on that sector.
Getting into more detail, Garnaut puts the case, as he did through the media earlier in the year, for emissions targets to be based on long term carbon budgets. Interestingly, this is an approach that we in the Greens have been discussing internally in updating our targets. A carbon budget is the total amount of emissions over time (say the 21st century) that is consistent with a particular goal – such as an atmospheric concentration target. The budget can then be divided between nations on an equitable basis (hopefully per capita), and policies set to ensure that, by progressively reducing emissions caps, we do not go over budget.
This is an approach, as Garnaut makes clear, that accords with the international concept of ‘Contraction and Convergence’, proposed initially by Aubrey Meyer and gaining considerable traction in the search for an equitable solution that developing nations will be most likely to sign up to.
The key, of course, is to get the budget right. If we assume that we can afford to emit more, and therefore expend more of our budget in the early years, it will mean greater effort and greater potential disruption in later years, as we struggle to catch up. That is why we were uncomfortable with the way Professor Garnaut originally raised the issue in the media, where he set it against the proposal for a 2020 target. His clear statements in this interim report, such as “there is no risk that an emissions reduction schedule culminating in a 60% reduction from 2000 levels by 2050 will be more restrictive than would be required”, give us hope that he understands this.
Which brings us, conveniently, to the question of 2020 targets. Garnaut, like the Government he serves, insists that he will recommend one, but they insist on calling it an ‘interim target’. I take issue with this label, as 2020 targets are seen by many now as more important than the longer term ones – both politically and scientifically. Scientifically, we need to see global emissions peak and start to come down by 2015 or sooner – if we don’t, too much of the budget will have been consumed and the window for avoiding catastrophic warming closes. Politically, without strong mandated action in the short term, longer term action becomes even harder to achieve. It will be fascinating to see how this debate pans out in the coming months.
Regarding the proposed details of the emissions trading regime, still to be concluded, of course, there are a few key points to be made.
Garnaut’s proposal for limiting compensation for trade-exposed industries is interesting. It is a huge step, in the current political context, to recognise that all-out compensation is inappropriate, noting that compensation was never given, for instance, to industries negatively impacted by trade liberalisation. However, quite a number of eyebrows have been raised in Canberra about the political realities of giving compensation to those who can argue that not to do so would lead to environmentally perverse outcomes. Surely, the cynics would argue, the aluminium industry will just cry out that they’ll move to China and burn dirtier coal if they aren’t compensated. Official structures would have to be set up to require companies to furnish evidence that such a move would be realistic and economically sensible, rather than staying or moving to hydro-powered Scandinavia. It’s an open question as to whether that could work. The preferable approach would be to call their bluff, with the likely outcome being that they would stay and improve their performance, as has happened in the past.
The sections on distributional impacts and structural adjustment show that Garnaut, like us, is grappling with the thorny issue of ensuring that the equity considerations of the changes can be dealt with without undermining the effectiveness of the policies. We certainly hope he will consider our suggestion, for low-income householders, of investing in energy efficiency on their behalf, to offset rising power bills while still achieving emissions reductions. On structural adjustment, it seems Garnaut is already thinking about ‘Just Transitions’ strategies to help coal-based communities, for example, attract cleaner industries and retrain their workforce.
Garnaut acknowledges that global experience shows that emissions trading must be backed up by an array of supportive measures in order to be truly effective. He notes the need for a substantial investment in energy efficiency – has he been reading EASI and our other efficiency policies? He notes the need for substantial ‘public good’ investment in renewables and shifting subsidies from polluting activities to cleaner behaviour, correcting market failures – has he been reading the Sun Fund? He notes the need for investment in transmission infrastructure to meet the new energy economy – has he even been reading Farming Renewable Energy?
Of course, we don’t have a monopoly on good ideas, but it is gratifying to see so much of our work reflected here, even if only in passing.
More troubling, however, is Garnaut’s call for government funding for coal with geosequestration, which runs counter to the polluter pays principle – throwing taxpayers’ money at an industry which has profited from pollution for so long it can easily afford to make that investment itself if it wants to survive.
All in all, there is much to be positive about in this paper – it is something that many of us couldn’t have imagined just weeks ago. But it still suffers from the fundamental problem that afflicts the vast majority of climate policy around the globe – defeatism. It is infected throughout with a view that we simply cannot achieve what we need to achieve if we are to have a really good chance of avoiding catastrophe, so we should just do what we think we can.
I am of the view that, if we set our minds to it, as a species, we can do this. If we decide to do it, we will. If we come from a position of defeatism, we haven’t got a snowball’s chance…
Some good points, Tim.
Thinking through the issues with PNG, Australia is that country’s primary aid donor and, guarantor of its security, and able to exercise a great deal of influence on its government by means both above-board, and, well, less so.
Were Australia to decide to play rough, we might well be in a position to quickly “encourage” PNG to come and join our emissions trading scheme on favourable terms to us.
Something to keep a close eye on.
Just to clarify, I would regard such bullying of our near neighbour, were it to happen, as a very bad thing.
Tim, I would like to see more consideration of Garnaut’s suggestion of differential targets - that is, targets if we go it alone compared with targets we adopt in the context of an international agreement.
What do you think about that? For example, if we stick with 60 per cent below 2000 levels by 2050, what point would there be given this is manifestly inadequate in terms of the science? An idea I would like to see Garnaut pursue in this regard is the possibility of innovation in renewable technologies producing profits that might ‘offset’ our more ambitious targets even in the absence of internationational consensus. After all, such technologies will save money. Professor Garnaut should consider this possibility, and what sort of international leadership it might provide.
Shoot this idea down by all means, but let’s test it.
Just now half way through reading “Scorcher” by Clive Hamilton. Definitely worth a read. A couple of things seem relevant.
Stationary energy accounts for 50% of our emissions. Electricity accounts for 70% of our stationary energy. Our six Aluminium smelters account for 16% of our national electricity consumption.
This means our Aluminium smelters account for 6% of our annual emissions. And yet these smelters account for a mere fraction of a percent of our GDP and very low number of jobs. The smelters are therefore hugely disproportionate polluters in terms of emissions per unit GDP or emissions per person employed.
Global Aluminium prices are presently extremely high (much higher than when the business case for building the smelters was made) making the Aluminium business extremely profitable.
The twin principles of “polluter pays” and “those most able to pay” come together very strongly here.
Lets imagine we were to now require as a condition of their continuing license to operate that Aluminium smelters must within 5 years actually produce an amount of (non-nuclear) renewable energy (solar thermal seems a good choice) equal to their total electricity consumption.
Smelting requires significant project engineering competence making them well equipped to take on the task.
Worst case, if they elected to go offshore (very unlikely due to expensive hard to move installed plant and the inevitability of paying some carbon tax elsewhere) then our GDP is hardly effected and our per capita emissions drop 6% taking us from 4 times the global average to 3.75 times the global average. A massive improvement on the present situation.
If they stay here then we have no GDP drop, indeed we get a stimulus through the process of building the plants and we also get a 6% drop in emissions and build our national intellectual capital and physical implementation capacity in the field of renewable energy construction.
It would seem easy to sell this policy in such a way that we would face no resistance from the voting public towards such an initiative.
We could even provide cheap (say 3%) loans over 10 years from our present budget surplus funds to provide them the cash to achieve the outcome. I note that the future fund is presently returning around 1% returns so 3% beats the future fund managers in terms of ROI.
Once this model was proven we could implement it with other forms of smelting mineral ores like nickel and iron. We could include energy intensive activities like crushing raw mineral ore prior to smelting.
Well written piece, that behind the print, highlights the issues that the Governments of Australia will need to grapple with over the the next 20 odd years.
The Governments need to encourage emission reductions without hurting the average Australian elector in the outer suburbs of Sydney, Melbourne, Brisbane etc., and without spending too much money, as the Reserve Bank has instructed them to cut their budgets. Implementing policies that increase taxation, reduce employment (especially of the battlers causing union backlash), reduce mobility (eg. a carbon tax on fuel), dramatically increasing energy costs (electricity, gas etc.) would potentially put their plans at risk, by an alternative party promising to revert to the status quo at an election.
Planning / implementation by the Governments for emission reductions, needs to be be treated as a medium to long term project with phases, objectives and deliverables (targets), that all stake holders agree to, and which are achievable. For example, it is no use have a deliverable of a 90% reduction on 1990 levels, if, with our ever increasing population (eg. Melbourne is expected to increase from 3.8 mil to 4.5 mil by 2020) we can only achieve a 60% reduction. As a retired project Manager, I can assure readers, that having a non achievable deliverable is the quickest way for all stakeholders to turn off, and minimal gains achieved.
In response to Concerned (comm 4), if the Governments utilise much, if any of their surpluses, then the Reserve Bank, and private banks would be penalised by overseas loan suppliers (overseas banks), further forcing up interest rates that the Governments are trying to keep under control.
Grant:
“having a non achievable deliverable is the quickest way for all stakeholders to turn off, and minimal gains achieved.
Absolutely. But the corollary of that is that an excellent way to undermine an issue which is building a head of steam is to repeatedly claim that the goals are not achievable.
Darren @ 3, re differential targets, I’m personally unconvinced. Most people would agree that the most important thing to do at the moment globally is to build trust between those rich countries willing to act, those pullling back, and the developing nations who could be convinced if they saw rich nations acting. The question is, do you do that better by adopting a target that is clearly not good enough and holding out the carrot of stronger action later if others join, or by unilaterally calculating would your equitable contribution would be and committing to it straight away. I’m not sure, although my gut feeling is that we need the credibility of committing to the right targets as soon as possible.
Grant@5
If we remove the possibility of using funds to create renewable energy generation infrastructure (which I think you might be implying) then it will be very had to get 90% reductions.
I don’t think there is a way of reducing emissions that has no negative economic implications. The best time to make these investments is when we do have a surplus, raising taxes to do it during a recession will be *much* harder on the average Australian.
I suggested loaning some of the surplus, not consuming the surplus. It is repayable. An obvious source of the means to repay it is through the smelters eliminated or reduced future electricity bills. This can not be analysed economically in the same manner as though the surplus were simply consumed.
For a proper economic treatment it is very much as though the government invests a small part of its surplus in corporate bonds sold by the smelter. Government obviously requires an investment vehicle for its surplus and bonds will quite obviously form part of this portfolio in the hands of any rational portfolio manager.
Although having read further through “Scorcher” it seems clearer we would all be better off if the smelters moved offshore. There are several reasons for this, not least of which is Australian Aluminium smelters are the most emitting smelters on the planet. Everyone else does it better. There are other compelling reasons to move them offshore related to the burden of the concessions they have won from previous governments.
Tim, when I said I would like to see ‘more consideration’ of differential targets, I meant analysis of them in your response given that Garnaut had suggested them. Like you, I am unconvinced - the targets must match the science. I say let’s set science-based targets and look to offset the economic impacts of these with commercial exploitation of world leadership in renewable technologies. To achieve that position and reap that reward, we need massive investment in renewables now.
Yup, agreed, Darren @ 8. Left them out of the post proper coz it was so long already! There was simply no way to address every point in the report. But you are right.
Re massive investment in renewables now, is THIS the kind of thing you mean? Massive investment in R&D and commercialisation which would back up a very high MRET and a barrier-leaping policy like Farming Renewable Energy”.
Put those three policies together, and we could easily build a world-leading domestic and export-oriented renewables industry in Australia in just a few years.
Tim@9.
Correct me if I’m wrong but the Sun Fund appears to be $3B over ten years which seems pretty microscopic in an economy with an annual GDP of nearly a trillion dollars. Thats a mere 0.03% of GDP.
Its much less than 1% of the total cost of servicing our net foreign debt over that period. Its a tiny fraction of what Greens policy would have us spend on foreign aid. Wouldn’t emission reduction at home be the best way to implement foreign aid?
The Sun Fund is about 0.1% of our expected commodity exports alone over that period.
My point really is the Sun Fund does not seem even remotely close to “massive investment in renewables now”. We certainly wouldn’t want anyone to accuse of us Howard-esque tokenism.
Given that the return on any renewable investment will continue for at least 25 years (with minimal operating cost) we can actually afford to spend a huge amount up front.
If the Sun Fund were 100 times larger over the ten year period then (given the scope of the problem) it would still not arguably qualify as a massive investment since its would then only be 3% of GDP in the face of a civilisation disrupting threat.
For a sense of scale a massive spend would be at least what we would spend on a war to defend ourselves from direct sovereign threat.
Properly considered in the context of the problem I believe the Sun Fund is two orders of magnitude too small to be considered a massive investment.
I am sure you intend we will spend other money as well but Sun Fund just looks very underdone especially if its intended as a “massive spending” centerpiece of policy.
How about this:
Push Rudd to divert the 30B tax cuts into super and then make super fund investment in qualified renewable generation projects tax free for 10 years.
Then make it part of the AGO charter to evaluate and qualify such projects.
That should put a fire under things.
Gilbert, the real question is not how much money do we think might sound good to invest in this, but how much is actually needed, surely, isn’t it?
For a major R&D and commercialisation program, people working in the industry have suggested to us that this is a good figure to be working with.
For the kind of money you are talking about, we could probably re-nationalise the whole energy sector and rebuild the network. That might sound tempting, but I don’t think there’s many people who’d agree that that’s an appropriate path to follow.
The tax cuts idea is intriguing, but I don’t know about throwing the whole lot into renewables. I would have thought we’d need to allocate significant funds to efficiency, transport, etc, no? But how about making the Future Fund a very clear climate-related investment fund? Worth some serious thought, definitely.
Tim@12
Okay, but don’t we want to get to 400ppm?
Many commentators say 400ppm peak is an impossible target and that a 90% reduction by 2050 would be very difficult to achieve.
But $300M per year for ten years is hardly anything, no one would seriously argue that this is too much to spend on the problem.
Apparently we’d need to spend so much it hurt in order to achieve 90% reduction. And yet we wouldn’t even notice spending $300M per annum.
It seems like there is a serious disconnect here. How do your industry advisors reconcile the gulf between these two points?
Also I don’t mean the $30B tax cuts would all go to renewables. I intend two separate things. The first being boost super by 30B and the second increase the attractiveness to the whole pool of super (i.e. not just the 30B) of investing in approved projects.
The government could include controls to limit the size of investment by capping the total permitted value of qualified projects and thereby be satisfied it has avoided undermining tax collections from super.
I am happy that the AGO could qualify any project that would have the effect of reducing emissions. So your other concepts can easily be included, it just needs to be a project that resembles an investment that will generate an ongoing return so that it is a valid super investment. It is easy to see how a generation plant would do this, it might be harder for some of the other ideas.
On one hand $0.3 billion each (for 10 years only) is deemed a “massive amount” of funding while on the other $7 billion each year for foreign aid is a trivial enough figure that its not worth much attention in these pages.
Foreign aid is great, but solving immediate problems for some seems (to my limited perspective) a smaller problem than climate change which will likely affect billions of people.
The existing funding plans seem to support a conclusion that short term foreign aid is overwhelmingly more important than long term climate change mitigation. Is that what you intend?
I am sorry if I am misunderstood this and in that case I’d be grateful to better understand the relativities here.
Tomas, isn’t that cherry-picking? You have chosen one single program we advocate and taken that, deliberately or not, to represent our climate policies, pitting it against total foreign aid budget. That’s where your relativities are confused.
If you add together the funding we are suggesting for all renewables projects, energy efficiency, transport, avoided deforestation (domestic and global), etc, etc, etc, the total would dwarf the foreign aid budget. I can’t give you a figure, because I haven’t added it up. Probably it’s something we should do, I acknowledge, and will do so as soon as I can find the time.
But again, I return to the point I made @ 12. Budgets should be determined by what level of investment makes sense for the given issue - for R&D, we believe this is targeted about right. Perhaps, given this response, it’s a bit low, and we’ll give some thought to discussing lifting it with the industry. See what they tell us. It is not necessarily the case that throwing more money at them will provide the solution - more important, in many ways, is the structured investment regime, driving developments from innovation right through to implementation.
For foreign aid, the figure, as I understand it, is based on a translation to the Australian GDP of the global numbers done by Jeffrey Sachs for the Make Poverty History campaign.
Do I think climate change is the most important challenge we face? Absolutely. Do I think we can solve the problem by throwing the largest amount of money possible at it? Absolutely not. Funding is crucial. But systemic change in regulations and the provision of services is actually far more important. That’s where the real emissions reductions are going to come.
Maybe I am missing something here, when a number of people are suggesting that the Government needs to spend big money to further emission reductions.
Has not the RBA instructed Governments (State and Federal) to reduce their overall expenditure (last I heard by at least 10 billion for the Federal) or they would push up interest rates even further, hurting the battlers in the mortgage belts. For Governments to spend big, they would need to further reduce other budgets (education / health / social services etc.) to cover the outlays, and not touch their surpluses, as the RBA (and Banks) would jump on them. Even redirecting the proposed tax cuts (the tax cuts should be just scrapped) to Super Funds, then instructing them to invest in projects, still puts the money into circulation, which is what the RBA does not want.
Expenditure needs to be at a business level, where business can cost justify energy reduction gains against their profit and loss, but possibly helped in a small way by tax concessions from State and Federal Governments.
I am sorry, but until people come up with suggestions that do not hurt the average voter, all Governments will tick along, handballing from committee to committee, talkfest to talkfest (probably for the next 20 years+).