Australia adviser urges cautious carbon targets
James GrubelCANBERRA, Sept 5 (Reuters) - Australia's top climateadviser on Friday recommended carbon be sold for an initialA$20 ($16) a tonne from 2010, with only marginal increases forthe first two years, to help business adjust to carbon tradingin Australia.
In an updated report on targets for a trading scheme,academic Ross Garnaut said Australia should also aim to cutemissions by at least 10 percent by 2020, or up to 25 percentif the government adopts a tougher target.
Environment groups condemned the new targets as too low tohelp stop global warming, but business groups said Garnaut'stargets were too tough and would be difficult to achievewithout major breakthroughs in clean energy technology.
"A 10 percent national emissions reduction target by 2020will be extremely difficult to achieve," said Mitch Hooke, fromthe Minerals Council of Australia, which represents Australia'smajor resource industries.
"Meeting this target without significant technologicalbreakthroughs is akin to moving Australia to a candleseconomy."
Garnaut said the government should sell carbon permits atA$20 a tonne initially, with the price rising each year by fourpercent on top of inflation, until an open market would set theprice of pollution from 2013.
Analysts said the recommended price was at the centre ofcurrent market prices for trades and would represent thepenalty price for companies for exceeding their emissionslimits, giving business some certainty in the early years oftrading.
"The price is bang in the middle of our current pricespread," said Gary Cox, head of environmental derivatives forNewedge Group in Australia. "On the screens right now the priceis A$19 bid, A$22 offered, so the price is pretty reasonable."
He was referring to Australia's embryonic over-the-countercarbon market, which saw its first trade in May when energygroup AGL Energy Ltd sold 10,000 Australian emission units toWestpac Banking Corp Ltd at A$19 per/tonne.
Since then about eight more trades have occurred at pricesranging from A$18 to A$21.50 a tonne.
Australia's centre-left Labor government has promised tointroduce carbon trading from July 2010 to help the country cutits carbon emissions, but has come under attack from companiesthat say the scheme could drive some firms out of business.
The government, which has made the carbon scheme a centralplank of its policy, says it is willing to negotiate withbusiness and has said Garnaut's report is only one source ofadvice.
"We respect his advice, we'll listen to his advice, butultimately it is for government to make its decisions on thesematters," Climate Change Minister Penny Wong told reporters.
Australia's expanded carbon trading system will cover 75percent of the economy, and 1,000 of Australia's biggestcompanies, with hefty initial subsidies for big polluting firmsto help them adapt.
The country is the world's 16th biggest carbon polluter andproduces about 1.5 percent of global emissions. But Australiais the fourth largest per-capita emitter, with five times morecarbon pollution per person than China.
A NEW KYOTO
World environment ministers and negotiators will meet inCopenhagen in late 2009 to try to work out a new agreement onhow to curb global emissions, to come into force after theinitial phase of the Kyoto Protocol pact expires in 2012.
Garnaut, who was asked to advise the government on the costsand impacts of climate change and carbon trading, has proposedtwo models for Australia's targets, based on a strongaspirational target from Copenhagen, and a softer target.
Garnaut said Australia should push for the new agreement toset a strong target to limit worldwide carbon dioxide emissionsto 450 parts per million in the atmosphere, although a limit of550 parts per million were more achievable.
Global atmospheric CO2 concentrations are about 390 ppmcompared with pre-Industrial Revolution levels of about 280ppm.
Under the stronger aspirational target, Australia wouldneed to cut its emissions by 25 percent by 2020, and 90 percentby 2050, based on levels from the year 2000. Gross domesticproduct would then be 1.6 percent lower than it would be in2020 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 and80 percent by 2050, with gross domestic product to be only 1.1percent lower than it would otherwise be in 2020.
Centre-left Labor government's target is to cut emissionsby 60 percent of 2000 levels by 2050.
Garnaut said Australia should set its own target of a fivepercent cut in emissions by 2020 if talks in Copenhagen fail toreach a global deal.
The Australian Greens, who share the balance of power withtwo independents in the upper house Senate, said the governmentneeded stronger targets than Garnaut recommended.
"The weak targets ... released today are based on outdatedscience, risk catastrophic climate change and will undermineglobal negotiations towards an effective climate treaty,"Greens leader Bob Brown said.
($1=A$1.22)
(Additional reporting by Rob Taylor and Bruce Hextall andDavid Fogarty)