[Oz-envirolink] Warm-up act in climate war Garnaut slams climate plan

[hugh spencer]

Oh dear - we are so stuck on the tar-baby of economic (and population)
growth - that I despair of any rational behaviour by government on this
issue.
I suspect  that the only way to get real change is through a citizen's
revolt - assuming there are enough citizens who can pull the i-pod ear
plugs out, or turn off their DVD's.... and take notice of what is happening

What about our children's future???

what, indeed...

H





    Two articles:


1.  Warm-up act in climate war Garnaut slams climate plan
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  http://www.theaustralian.news.com.au/story/0,25197,24824789-11949,00.html

Warm-up act in climate war

Lenore Taylor, National correspondent |
December 20, 2008
The Australian

  ONE weekend early this month, Resources Minister Martin Ferguson boarded
a plane to  Perth to meet Woodside boss Don Voelte, who had not endeared
himself to the Rudd  Government. The energy group's chief executive had
started to attack the Government's  proposed emissions trading scheme to
reduce greenhouse gas output the day after a  discussion paper was launched
in July, and didn't let up for months.

  When the global financial crisis hit, he pronounced the ETS "dead on
arrival". Some of  Ferguson's colleagues were calling Voelte "the Sol
Trujillo of the resources sector". The  comparison to the spirited Telstra
chief showed how much they didn't like him.

  The July discussion paper on an official auction and trading system for
pollution rights to  encourage cleaner industry had included a formula for
handing up to 90 per cent of required  pollution permits free to export
industries whose overseas competitors do not pay a price on  carbon
emissions, until such time as a global climate change deal is struck.

  The problem facing Voelte and other CEOs of liquefied natural gas
companies was that the  free-permits formula was set at a level that
excluded LNG. Even in November, when officials  from the Department of
Climate Change began canvassing a lower compensation threshold  in private
talks with resource industries, LNG companies calculated they still would
miss out.  But when the Government's final scheme was unveiled in a white
paper on Monday, it baldly  asserted that LNG was "likely to be eligible"
to receive 60 per cent of its emission permits for  free. Voelte issued a
meek statement acknowledging the result.

Uncharacteristically, he  refused to make further comment.

  Officials insist the last-minute inclusion of LNG was because the
companies had finally  provided figures that showed they would meet the new
eligibility criteria after all. Those close  to the decision-making process
insist cabinet had decided that "one way or another, LNG  would get in". In
other words it was a political deal, finessed by Ferguson and other
ministers  in one-on-one meetings with Voelte and the other CEOs.

  If those who have spent months crunching the numbers to find out who got
free assistance  were astonished at LNG's inclusion in the ETS compensation
scheme, they were also  perplexed by the exclusion of coalmining. The final
scheme design explains that coalmines  produce vastly different quantities
of the potent greenhouse gas methane, depending on their  geology, and it
was therefore difficult to include them in the general compensation scheme.

  The coal industry says it would have been quite easy to include mines
above a certain  emissions intensity. But the Government chose to offer
coalmines $750 million over five  years in an "abatement fund". Some of the
abatement money will still go to buy permits for  the gassiest mines, but
they will obtain far fewer than they would have under the general
compensation arrangements. The coal industry is unhappy, to put it mildly.

  Privately, government sources are blunt. It would have been politically
unacceptable to offer  free permits for "dirty coal". Leaving it out was
another political decision. Minerals Council of  Australia CEO Mitch Hooke
has no doubt the Government made a "unilateral decision to  exclude coal
because of the political odium" of giving free permits to coal.

  The curious story of the treatment of coal and LNG is really the story of
the entire emissions  trading scheme.

  It is a political deal cut with big industries that are also big
employers, with an eye to the  forthcoming political deals that will have
to be made in the Senate and the even bigger  political deals that will be
made around the negotiating table with other countries at the UN  talks in
Copenhagen next year.

  The backdrop to all the deal-making is the economic crisis and Kevin
Rudd's determination  that Australia will start the extensive
re-engineering process of becoming a low-carbon  economy slowly and not at
the cost of Australian jobs or his chances of re-election.

  Ongoing qualitative polling and old-fashioned political common sense
convinced the  Government that while swinging voters in the mortgage belt
cared about climate change, they  weren't prepared to make big sacrifices
in terms of their standard of living. So the  Government was generous with
its industry compensation, giving away in free industry  permits a full
$2.9 billion worth of the $11.5billion it expects to raise in the first
year of the  scheme. That represents 25 per cent of available permits, but
the proportion could rise to 45  per cent by 2020, depending on how fast
these industries grow.

  The Government had already made the political compromise of offsetting
any increase in  petrol prices - blowing another $2.4 billion in the first
year - and it allocated $700 million in the  first year to ease the shock
for the dirtiest brown-coal power generators, even though its  advice
suggested it was highly unlikely there would be any disruptions to
electricity supply.

  Taken together, these political deals and compromises with industry had a
fateful effect on  the Government's ability to push ahead with the thing
the whole exercise was supposed to  achieve: actually reducing Australia's
carbon emissions.

  The Government has pledged that Australia will reduce its emissions to 5
per cent below  2000 levels by 2020, and has left open the possibility that
it could increase that target to cuts  of 10 or 15 per cent as part of a
global agreement including other leading emitters.

  But as its own climate adviser Ross Garnaut points out today, going for a
higher emission  reduction target, especially if trade-exposed industries
grow faster than the rest of the  economy, leaves open a "substantial risk"
that the ETS will no longer fund itself through the  revenue raised by
auctioning pollution permits, but will instead eat into the budget bottom
line.

  And Garnaut also points out that the Government has not set out clear
criteria for unwinding  the expensive political deals, making it very
difficult to do so.

  It has promised to review the assistance every five years but has not
said exactly how  comprehensive a global deal would be needed for the
compensation to start to be withdrawn.  It has also promised five years'
notice of any changes in the assistance program.

  Think how successive governments have failed to meet their promises to
withdraw taxpayer  assistance to the car industry and you get some idea how
long and painful the process might  be.

  The corner into which the Government has painted itself is made clear by
calculations by  local think tank the Climate Institute, according to which
the cumulative effect of the political  deals with industry severely limits
the Government's ability to bump up the ambition of its  emissions
reductions.

  According to the Climate Institute, a 5 per cent national target means
the non-shielded parts  of the economy have to reduce their emissions by 18
per cent. If the Government tried for a  15 per cent national cut, the rest
of the economy would have to reduce its emissions by a  whopping 29 per
cent.

  The Government has overcompensated low and middle-income households in
the first year -  at a total cost of $3.9 billion, assuming it gets $25 for
each pollution permit it auctions - but if  more and more of the auction
revenue is eaten up by free permits to industry, there will be  less money
available for the increasing burden on the rest of the economy.

  Officials have conceded household compensation may need to be funded from
the budget in  the future, rather than from the revenue the scheme
generates from the auction of pollution  permits. That is if there is no
comprehensive global deal and if trade-exposed industries keep  getting
bigger proportions of the free permits, and if the Government increases the
ambition  of Australia's target.
  The Government paints this as a remote possibility; Garnaut and the
Climate Institute think it  is a whole lot more likely, which means in
effect the compensation deals have almost  certainly locked in modest
targets in the first decade of the scheme.

  The Government cannot afford to go much harder, no matter what is decided
in  Copenhagen. Still, the furious shoe-throwing reaction to the
Government's compromise from  the environment movement is steeped in
politics, too. The political imperative of the Greens  is to build momentum
towards an international deal of sufficient momentum that it would halt
further global warming blamed on emissions.

  But all governments, not just ours, have other pressures bearing down on
them. The  European Union, which has led the world on the issue, has
promised 20per cent cuts on  1990 levels by 2020. But it is already well
along the way to that target by virtue of having shut  down the filthy and
inefficient production in eastern Europe. It is also protecting its
industry to  an even greater extent than Australia. European manufacturers
will have to buy only 20 per  cent of their permits at auction in 2013,
rising to 70 per cent by 2020. Australia's big  manufacturers will be
buying 100 per cent of theirs from 2010. If European industries are  deemed
to be trade-exposed, they won't have to buy any permits at all, which puts
our deals  and concessions well in the shade.

  US president-elect Barack Obama, who will finally break the impasse that
has stalled  international climate talks for eight years, is pledging not
to cut US emissions by 2020, but  instead to stabilise them at 2000 levels.

  And that's before he's even started discussing things with Congress.

  Australia, too, has a few more rounds of negotiations before its scheme
becomes law. Every  interest group and every industry that didn't quite get
what it was asking for is beating a path  to the Senate.

  Heavy industry says the costs it must bear are still considerable despite
the Government's  concessions. Industries including cement and coal are
already lobbying the Coalition for  more changes. But the Coalition is
split on the issue and using an inquiry to buy time to come  up with a
unified position by the time the Government unveils its exposure
legislation early  next year. In the meantime, conservationists are
mounting a last-ditch campaign to convince  every senator who will listen
that this scheme makes neither environmental nor economic  sense.

  It's said a camel is a horse designed by committee, which makes you
wonder what kind of  bizarre ETS creature could emerge from the upper
house.



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http://www.theage.com.au/national/garnaut-slams-climate-plan-20081219-72dl.html?
page=-1

  Garnaut slams climate plan

      * Michelle Grattan    
* December 20, 2008

  ROSS Garnaut has launched a scathing attack on the Government's emissions
trading  policy, condemning its failure to embrace a more ambitious goal
and the multibillion-dollar  compensation for electricity generators.

  In his first intervention after Monday's unveiling of the Government's
blueprint, Professor  Garnaut  the Government's climate guru  said last
night that the plan would get "5½ out  of 10 at a good university".

  Writing in today's Age, he says it makes large transfers of money "from
the general  community to particular interests", and warns of its fiscal
and environmental risks.

  There is "no public policy justification for $3.9 billion in
unconditional payments to generators"  for hypothetical future loss of
asset value.
  "Never in the history of Australian public finance has so much been given
without public  policy purpose, by so many, to so few," he writes. "The
best that can be said is that these are  once-and-for-all payments  unless
the spectacular success of investment in lobbying  inspires repetition and
emulation."

  But he does endorse the Government's unilateral target of a 5 per cent
reduction on 2000  levels by 2020, which is in line with his review.

  But that review said a 25 per cent target should be kept on the table in
the slight hope of a  comprehensive international agreement. The Government
says it won't consider such a  target until after 2020. The review was also
much tougher than the white paper in proposals  to compensate industry.

  Professor Garnaut urges the Government to rethink its position on the 25
per cent target  before next year's Copenhagen climate conference,
especially if the Obama presidency and  China's response bring hope of an
unexpected breakthrough.

  "Australia cannot play a strongly positive role in encouraging the global
community towards  the best possible outcomes if it has ruled out in
advance its own participation in strong  outcomes," he writes.

  He warns that high payments for trade-exposed industries in both Europe
and Australia, and  presumably other countries, justified on the grounds of
the international financial crisis, could  serve to worsen the downturn  as
happened when the US and other countries raised  protection in the 1930s,
deepening the Great Depression.

  Professor Garnaut points to large risks to public finances in the
five-year price cap for  emissions permits and in the issuing of free
permits to trade-exposed emissions-intensive  industries, although he says
the permits are based on sound policy.

  "The problems arise from the absence from the white paper of a sound
conceptual basis for  payments," which has profound consequences, he
writes. "Sound principles would see the  automatic withdrawal of payments
as carbon constraints emerge in other countries.

  "With political bargaining determining payments, as in the white paper,
there is no obvious  point at which payments would be partially or
completely withdrawn." Even if there was an  international agreement that
completely removed the case for payments, five years' notice  would need to
be given for withdrawing them.

  Professor Garnaut said last night the "next reforming Australian
government will have as its  central objective the removal of the
distortions in the ETS' trade-exposed industries".

  He said the scheme would have been better if it had taken on more of his
proposals.

  Supporting the 5 per cent unilateral target, he writes that this is a
challenging target in the  absence of an international agreement. "To go
further would run the risk that Australia's  example of early action would
be negative rather than positive in its influence on others."





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