The eagerly awaited
Targets and Trajectories supplementary draft report by Professor Garnaut reiterates that the impacts of unmitigated climate change on Australia will be severe. The report proposes emission reduction targets and trajectories for an Australian emissions trading scheme.
The report suggests two approaches to setting targets and trajectories, the first applied during 2010–12 and the second period from 2012 onwards.
Fixed price transitional period 2008–12
Professor Garnaut confirmed that 2010 was an appropriate start date for an Australian emissions trading scheme. In addition, the period from 2010 through to 2012 should be considered a transitional period ‘in which the emission trading scheme is established soundly for the larger task that will lie ahead it after 2012’. The larger task is reaching the post-Kyoto international agreement on global stabilisation of greenhouse gases. It is suggested that during this transitional period a number of emissions trajectories are to be considered with the decision on which particular trajectory will apply once international agreement is reached.
With respect to an emissions trading scheme over the 2010-12 period, it is proposed that permits are to be sold at the fixed price of $20 per tonne in 2010 rising 4 per cent + CPI every year. Based on economic modelling, this approach is said to reflect the price path that would be followed if global agreement were to be directed to 550ppm concentrations of global greenhouse gases.
Beyond Kyoto – 2012 onwards
The report proposes that from 2012 onwards Australia’s emissions target should be to reduce emissions net of international trading by:
- 10 per cent from 2000 levels by 2020 (30 per cent per capita), and
- 80 per cent from 2000 levels by 2030 (90 per cent per capita).
These targets are said to represent a reduction of 17 per cent (27 per cent per capita) from the levels expected at the end of the transitional period (2012) and are based on international agreement to stabilise concentrations of greenhouse gases to 550ppm. The report concluded that the more stringent 450ppm target, although highly desirable, is not possible due to emission growth in developing countries such as China.
Emission trajectories in the report are based on ‘per capita’ because, as Professor Garnaut states, ‘per capita allocations provide the only possible basis for an international agreement that includes developing countries. This is because it takes population growth into account and gradually reduces the weighting of historical starting points over time.’
It is no surprise that the report states that the emissions trajectory for an emissions trading scheme should be consistent with these targets. Under the scheme, from 2012, permits would be floating with a price to be determined by the market. Under this approach, the report states, that permit prices would settle to around $23 in 2013 and rise by 4 per cent + CPI each year.
The report has much to say about the importance of international agreement stating that such action is ‘urgent and essential’ as it is the only way to reduce political economy risks pertaining to climate change regulation. However, in the absence of international agreement on global GHG reductions:
the report proposes that an Australian emission reduction target of 5 per cent on 2000 levels by 2020 (25 per cent per capita) should be adopted which is consistent with the Federal Government’s policy of 60 per cent emission reduction on 2000 levels by 2050, and
- complete failure of international agreement as to rules and opportunities for international trade in permits, under the Kyoto Protocol or otherwise, the report proposes that Australia should maintain an emissions trading scheme
- and the fixed price approach under the transitional period ($20 per tonne increasing 4 per cent + CPI each year) should apply until the earlier of international agreement and 2020.
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