December 2008

The Carbon Pollution Reduction Scheme White Paper has been released. Australia’s Prime Minister Kevin Rudd has announced an emissions reduction target of 5-15% in 2020 compared to 2000 levels.

The target of 5-15% by 2020 sends a signal to the rest of the world that Australia is not willing to play its part in an international agreement that stabilises at 450 ppm or less. It does not even signal that Australia is willing to stabilise at 500 ppm or less. It obstructs a good agreement on climate change. This means that it says that we don’t care about the Great Barrier Reef, we will not make a serious attempt to stop it from being destroyed or seriously degraded. Curiously, Kevin Rudd states that 450 ppm should remain a core part of international negotiations.

Rudd and the White Paper have argued that a 5% reduction would imply greater per-capita reductions than the EU’s 20% reduction by 2020 because of Australia’s greater projected population growth. This argument is irrelevant because Australia’s per-capita emissions are much higher than the EU’s. Any international agreement that does not have high per-capita emitters reducing emissions more than low per-capita emitters would never be accepted by the developing countries in the world. Rudd’s approach makes promising per-capita approaches to climate change, such as contraction and convergence, more difficult to achieve.

In short, there are four problems with the targets that Rudd has chosen:

  1. They are too weak to correspond to the stabilisation targets that we need to avoid dangerous climate change. They effectively rule out Australian cooperation with global stabilisation targets that add up to 500 ppm or less.
  2. They are based on a model where low per-capita emitters and developing countries bear a disproportionate amount of the burden of emissions reductions. They do not take into account Australia’s high per-capita emissions and are therefore inequitable.
  3. This means that developing countries have less incentive to participate in a global agreement, making the mitigation task harder.
  4. There is considerable evidence that Australia can afford much more mitigation — the expected cost of climate change will be greater than the expected cost of mitigation.

Now for some comments on specific aspects of the White Paper.

Assistance measures: Much money is being squandered on assistance to emissions intensive industries. The coverage of assistance to “emissions intensive trade exposed” industries has been expanded to include industries that made the most noise, such as liquefied natural gas. Rentseekers have been rewarded. There will also be $3.9 billion dollars (assuming a $25 carbon price) in free permits handed out to coal-fired electricity generators. This is money that could have been invested in low emission technologies, reducing emissions from deforestation or forest degradation, or assistance to low income households. Instead it does nothing more than line the pockets of shareholders.

The large amounts of assistance to polluting industries have meant that there much less funding available for compensating households. The distribution of assistance to households is strange, households with incomes of less than $20,000 are given less assistance than households with incomes between $20,000 and $120,000. Newstart recipients will recieve $14.20 more per fortnight; people on the minimum wage will recieve $14.95 more per fortnight. No money has yet been allocated to help households increase their energy efficiency.

Low price cap on permits: There will be a price cap on permits, so the emissions cap can be exceeded by firms buying more permits at a price of the level of the cap. According to the White Paper:

  • The scheme will have a transitional price cap for the period 2010–11 to 2014–15.
  • The level of the price cap will be set at $40 commencing in 2010-11.
  • The level of the price cap will rise in real terms by 5% per year.

This price cap is less than recent estimates of the social cost of carbon from economists such as Richard Tol [Richard Tol disagrees, see comments]. It is much less than what Nicholas Stern has suggested is likely to be the social cost of carbon. Having a price cap does not make sense if it is less than the social cost of carbon.

No price floor: I have discussed why an emissions trading scheme needs a price floor here. Dr Richard Denniss, from the Australia Institute has recently pointed out a problem with purely cap-and-trade schemes, that in my opinion could be addressed by a price floor, if it was high enough. With cap-and-trade schemes, if a household decided that due to concerns about global warming, it wanted to reduce its electricity consumption, that will not necessarily reduce global warming. What it will mean is that the electricity generator would not sell as much electricity, would not need to buy as many permits, and another firm could buy the permits more cheaply. The total amount of permits will be the same. This is more of a problem when the cap is too weak.

A price floor, it it was high enough, would mean that the scheme would function more like a carbon tax, but still with an absolute cap on emissions. A price floor could be introduced by there being a reserve price when permits are auctioned, or by firms paying an extra fee when they exercise their permits.

Forestry: The White Paper proposes to cover reforestation, on a voluntary basis, and not cover deforestation. Forest entities will not be required to surrender more permits than have been issued for an individual forest stand. Only activities that are covered by the Kyoto Protocol will be included. Judith Ajani and I have shown that at carbon prices of significantly less than $20 per tonne, there will be more revenue from using plantation forests as carbon sinks that as sources of wood. Because native forest logging does not attract a carbon price, and is not properly regulated, there will be an increase in native forest logging. This is likely to lead to carbon leakage from the plantation forest sector to the native forests logging sector, and a net increase in emissions. We made some submissions to the Carbon Pollution Reduction Scheme green paper here and here.

Update: The Australian Governments’ climate change advisor, Ross Garnaut, has written an article criticising the White Paper for its conditional targets not being higher enough, the inclusion of a price cap, and the transfer of wealth to emissions intensive rent-seeking industries. This article was published in the Fairfax press, and at East Asia Forum (under the title oiling the squeaks)..

The Australian Government will release its Carbon Pollution Reduction Scheme White Paper on December 15. This will include a target range for greenhouse gas emissions in 2020. Australia has drawn considerable criticism from the international community because it has reneged on its commitment to announce it targets at the climate negotiations in Poznan. In an interview with Kerry O’Brien on the 7.30 Report, Australia’s Prime Minister Kevin Rudd stated:

KEVIN RUDD: … And I’m sure when this is delivered, early next week, we’ll get attacked from the left, from the right, we’ll get attacked by various radical green groups saying that we haven’t gone far enough because we haven’t closed down the coal industry by next Thursday.

KERRY O’BRIEN: I think that’s a little unkind, but …

KEVIN RUDD: Well, I think it’s – no, Kerry, this is absolutely true. We’ll be attacked from the far right and by various business groups, I suppose, and certainly the Liberal Party, for doing anything at all. And we’ll be attacked by extreme green groups for not taking the most radical course of action.


KEVIN RUDD: We intend to steer a balanced course.

As well as using straw-man style arguments to attack critics, the Prime Minister is arguing that his target will be appropriate because he will be criticised from both sides. This does not make sense — whether Australia’s targets are appropriate depends on the science, on whether they are equitable, on whether they are achievable, and whether they will increase the likelihood of a comprehensive international agreement that will mitigate climate change. What is not relevant is whether they are criticised by participants in two different sides of a political debate. Instead of underestimating the intelligence of the Australian public, the Prime Minister should address the important issues.

The following cartoon illustrates the Prime Minister’s argument quite well (hat tip to JulieG).

Update: There is an open comments thread and links post on the White Paper at Larvatus Prodeo. The White Paper is here, the target range is 5%-15% reductions compared to 2000 by 2020.

Given a particular stabilisation target for global carbon dioxide levels or greenhouse gas levels, how much would the world need to reduce its emissions by a certain year (e.g. 2020, 2050)? How much should Australia reduce its emissions by a certain year? I have found the following papers to be useful for this:

The first paper suggests that a target of 350ppm CO2 would require global emissions reductions of 5.17% per year. The second paper suggests that if we were to stop emissions overnight, then CO2 levels would eventually stabilise at approximately 300 ppm.

One approach to allocating emissions reductions between countries is ‘Contraction and Convergence’ where countries eventually converge to equal per-capita emissions. How much a particular country emits in a particular year is then based on the convergence date and the stabilisation target (which determines the contraction rate, but this also depends on carbon cycle feedbacks). Garnaut’s targets are based on a convergence date of 2050, which many would argue is unfair to developing counties and low per-capita emitters. The Global Commons Institute has a tool that can be downloaded, which estimates allocations for different countries given different convergence dates. Estimates obtained using this tool for Australia to contribute to 350ppm are 57-60% reductions for a convergence date of 2030; 45-49% reductions for a convergence date of 2040; 37-42% reductions for a convergence date of 2050 (relative to 2000 emissions). These figures are assuming that convergence starts at 2000, so if they were updated to take emissions since then into account, the reductions will become greater.

Because developed countries are also responsible for more historical emissions, Contraction and Convergence will also require some additional forms of payments, technology transfer, adaptation assistance, or aid for developing countres, before it can be considered to be truly equitable.

The Guardian reports:

The £12m defences of the most heavily guarded power station in Britain have been breached by a single person who, under the eyes of CCTV cameras, climbed two three-metre (10ft) razor-wired, electrified security fences, walked into the station and crashed a giant 500MW turbine before leaving a calling card reading “no new coal”. He walked out the same way and hopped back over the fence.

All power from the coal and oil-powered Kingsnorth station in Kent was halted for four hours, in which time it is thought the mystery saboteur’s actions reduced UK climate change emissions by 2%. Enough electricity to power a city the size of Bristol was lost.

Yesterday the hunt was on for the man dubbed “climate man” or the “green Banksy”. Climate activists responsible for hijacking coal trains and breaking on to runways said they knew nothing about the incident.

It has been reported in The Age that the South African Environmental Affairs Minister Marthinus Van Schalkwyk has singled out Australia as one of four industrialised countries that needs to put its emissions reductions on the table. He has stated that:

Kyoto-ratifying developed countries should adopt an emission reduction range of at least 25 percent 40 percent below 1990 levels by 2020. This will give credibility and enable us to finalise ambitious mid-term targets for all developed countries within this range by the end of 2009, in time to avoid a gap between the first and second commitment periods of the Kyoto Protocol and thus secure the carbon market. Without such an unambiguous commitment it will be very difficult to engage developing countries in a credible way to make their deviation below baseline “substantial”.
* Japan, Russia, Australia and Canada have avoided putting their numbers on the table for too long. They now need to come forward with credible and ambitious mid-term targets within the 25 percent to 40 percent range for 2020
* From the United States (US) we expect comparability of commitments and compliance. We appreciate President-elect Obama’s commitment to restore America’s leadership in international global warming negotiations. In 2009, we will be looking to the US to come forward with ambitious commitments that will keep the world in the IPCC’s most ambitious stabilisation scenario for 2020.

Tim Hollo has also commented on this at Rooted.

Climate Progress has reported from Poznan that

Dr. Harlon Watson, a political appointee by the Bush Administration and lead negotiator in Poznan, has continued to reject emissions targets with base years attached, and is working with U.S. allies (Australia, Canada, Japan, New Zealand) to stall negotiations. These actions actively jeopardize our future.

This is somewhat different to Bali in 2007 when it was reported in the Sydney Morning Herald that

THE Prime Minister, Kevin Rudd, signalled his support for developed countries, including Australia, agreeing to making deep cuts in their greenhouse gas emissions in the next 12 years.

In a significant move last night the Australian delegation to the UN climate talks stated it “fully supports” the proposal that developed countries need to cut their greenhouse gas emission by 25 to 40 per cent by 2020.

The world will have to wait until December 15 to find out about Australia’s targets when the Australian government releases its White Paper. If Treasury’s modeled scenario’s are any guide, then the most likely targets for Australia to announce will be between 5% and 15% reductions by 2020. The Australian government had announced that it would be releasing targets before the negotiations at Poznan. It is now waiting until afterwards.

The Australian government has also been criticised for taking a hypocritical position on forestry at these negotiations.

Update: John Hepburn, from Crikey’s Rooted blog, has reported that Australian delegates have hardly said a word – apart from suggesting time-wasting agenda changes, and have barely participated in negotiations (possibly spending more time at the bar).

Further Update: Submissions to the UNFCCC Ad Hoc Working Group on Long-Term Cooperative Action (AHG-LCA) from different countries are available from here.

Further Update: The Guardian reports that Australia, along with the US, New Zealand and Canada, have deleted a line about indigenous peoples’ rights from a draft agreement on protecting forests. The original confidential draft, seen by the Guardian, talked of “noting the rights and importance of engaging indigenous peoples and other local communities”. The amended version mentions only “recognising the need to promote the full and effective participation of indigenous and local communities”.