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Business-as-usual cannot trump the laws of science on climate change

The Australian Greens today warned the Rudd Government that its emissions trading scheme must be based on science.

"Prime Minister Rudd must recognise that he cannot negotiate with the laws of physics and chemistry. Speeding up already announced renewable energy funding will not compensate for weak targets," Australian Greens Deputy Leader and Climate Change Spokesperson, Senator Christine Milne, said.

"The only certainty provided by weak targets is that they will have to be increased very soon. The Prime Minister's spin that he is trying to strike a 'balance' between greens and business is scientifically ignorant nonsense," Senator Milne said.

A target that aims at 550 ppm is a recipe for global catastrophe that will not only destroy the Great Barrier Reef and the Murray Darling, but also melt the glaciers that feed fresh water to 2 billion people in Asia, and trigger positive feed-back loops that may make life-destroying runaway heating unstoppable. 450 ppm still leaves a greater than 50% chance of exceeding 2C warming, beyond which point feed-back loops wait. Al Gore used the Poznan conference to call for a target of 350 ppm.

The Rudd Government's suspected most ambitious outlying aspiration of 25% emissions reductions by 2020 is the absolute minimum starting position, with 40% being a fair target to give the world a reasonable chance of preventing global catastrophe.

"Facing up to climate change requires a full-scale war effort to transform our economy and society onto a sustainable footing. Yet, in the past two days Prime Minister Rudd has announced that a single rail project for the coal industry in the Hunter Valley will receive $80 million more from the government than the entire renewable energy sector of Australia.

"An announcement of 5-15% targets, which would likely see climate tipping points breached, will have three major effects in the coming months.

"First there will be a drastic escalation in public anger as voters realise that the Rudd Government is not meeting its promise to tackle climate change. Second there will be significant diplomatic pressure brought to bear on Australia in the lead-up to Copenhagen - including the threat of trade sanctions. And third, in the face of the backlash, many companies will recognise that lax targets do not provide the investment certainty they were seeking.

The Greens have also been effectively locked out of the 'lock-up' briefings being provided to NGOs and industry tomorrow morning before the White Paper's release. After repeatedly requesting a briefing, the Greens have finally been offered a lock-up from 11.30-12.30.

"It is quite clear that the Government is attempting to lock the Greens out of the debate, just as Australia locked the rest of the world out of engagement with its targets at the Poznan conference. This is foolish politics to complement foolish policy," Senator Milne said.

*What do the Greens want from an emissions trading scheme?

To be environmentally effective

By far the most important criterion that we should use to judge the Government's proposed emissions trading scheme is environmental effectiveness. That is, do the scheme and its complementary measures reduce emissions to the extent that Australia is fairly contributing to the global challenge of constraining global warming to less than two degrees? To achieve this, Australia must reduce its emissions by 40% by 2020.

25%, which seems to have become a maximum possible figure rather than a minimum acceptable, is not only inconsistent with maintaining a safe climate, but it is also grossly unfair in that it implies that the developing world must commit to very drastic emission reductions while rich Australia does little. Rudd's proposal will kill any hope of global consensus.

To be equitable

Low income householders who face higher costs (especially energy) must be helped to reduce costs by reducing their carbon liability. The Green paper estimates that at $20/tonne ($40-$60 is needed) the "Scheme related increases in prices as a proportion of household expenditure on the CPI basket of goods and services are estimated to range from around 1.2 per cent for sole parent households to around 0.8 per cent for high income households." These may not seem like large amounts but many households are already over-extended. Householders must be assisted with energy efficiency upgrades.

To be economically efficient

This mainly relates to the questions of permit allocation (free versus auctioned), compensation to trade exposed industries and sectoral coverage. Economic efficiency is a third order issue because, if the scheme was poor on allocation and compensation, but still had a stringent emission cap, it could still be an environmentally effective scheme.

On allocation, regardless of whether permits are given away for free or auctioned, the expected energy price rises are the same. The reason the Greens and most economists prefer auctioning is that the government can put auction revenues to an economically productive use - such as compensating households, promoting energy efficiency, funding renewable energy R&D etc. By contrast, with free allocation polluters receive a lump-sum distribution of valuable assets. This represents a pure lump-sum wealth transfer from energy consumers to energy producers. There is no incentive attached to this transfer, and so it doesn't result in a change in marginal behaviour.

On compensation, the 'emission intensive trade exposed' industries are clearly deserving of some level of compensation where they are competing with foreign companies not burdened by carbon prices. The Greens believe that direct payments, funded from auction revenues, to the trade exposed industries may be appropriate if temporary and conditional upon the demonstration of efficiency gains. There is no rigorous argument for compensation of existing electricity generators.

On sectoral coverage, broad coverage increases the chance of finding cheap abatement. The Greens believe that transport should be included but that agriculture should be left out for now because of the high cost of monitoring and verification. Forestry should be excluded until full carbon accounting of all forestry emissions is in place. The development of full carbon accounting methodologies, including soil carbon, should be accelerated.

To ensure compliance

Environmental effectiveness requires that participants in an emission trading scheme actually comply. This would be in doubt if the scheme simply required a fine to be paid for non-compliance. There should be a "make-good" provision which would require participants to make good permit short-falls in later years.

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