Business wants more clarity before Garnaut action

By: Chris Smith

A 25 percent reduction in emissions by 2020 will most likely inflict "severe damage" on the economy, say industry groups,

A 25 percent reduction in emissions by 2020 will most likely inflict "severe damage" on the economy, say industry groups, who want greater commitment from other developed nations before any of today's Garnaut recommendations are actioned.

There has been much talk in the hours since Federal Government climate change adviser Professor Ross Garnaut released his final report into everything climate change, which upped his previous 10 percent greenhouse gas target by 2020 to 25 percent of year 2000 levels.

The 2050 target was also bumped up to a 90 percent reduction in emissions – 30 percent higher than the government’s own 60 percent target.

He is also pushing for Australia to begin achieving these targets by 2010 - up to five years earlier than most business sectors are pushing for.

Part of Garnaut’s reasoning for increasing the urgency in his recommendations stems from a belief that "on a balance of probabilities, the failure of our generation on climate change mitigation would lead to consequences that would haunt humanity until the end of time".

The Federal Opposition have labelled the decision "reckless", while businesses are concerned at the report’s lack of clarity as to the likelihood of Australia securing the appropriate international partnerships needed to ensure the success of a carbon reduction scheme of this magnitude.

Australian Chamber of Commerce and Industry Chief Executive Peter Anderson says the absence of global emissions trading agreements is one of two "critical missing links" in the report.

"In the current environment of global market instability, business cautions that only a measured approach, tailored to international development and with appropriate compensation arrangements, would be in the national interest," he says.

"[We are] also especially concerned about the impact of an emissions trading scheme on small business, given the foreshadowed increase in input and energy costs."

According to Australian Industry Group Chief Executive Heather Ridout, Australia "simply cannot afford to move too far ahead of the rest of the world".

"Whichever way you look at it the targets proposed for 2020 in the Final Report are very substantial," Ridout says.

She says trying to achieve anywhere close to Garnaut's recomended targets before all major emitters make similar commitments would require very strong protections for Australia’s trade-exposed industries.

"Garnaut’s more ambitious proposal for a 25 percent reduction on 2000 levels would require a staggering fall in emissions intensity of more than one third. It is very difficult to see how this could be achieved by 2020 without inflicting severe damage on the economy," Ridout says.

Even Garnaut concedes there is little hope of sustainabley reaching his proposed targets if international players do not come to the table.

"Of all developed countries, Australia probably has the most to lose from inaction and the most to gain from global mitigation," he warns in the report.

"Without strong, effective and early action by all major economies, it is probable that Australians, over the 21st century and beyond, will experience disruption in their enjoyment of life and increasingly of their prosperity."

Along with the introduction of carbon trading by 2010, Garnaut proposes the establishment of a carbon bank to oversee the long-term stability of the scheme and the implementation of a transition period from 2010 to the conclusion of the Kyoto period in 2012.

He maintains half of the revenue from trading should be spent compensating households, while further payments should be made to trade-exposed, emissions-intensive industries.

"Australia should throw its full weight behind securing an effective international agreement from 2013," Garnaut says.

If the world fails to reach a climate change target at next year’s talks in Copenhagen Garnaut says Australia must atleast cut emissions by 5 percent by 2020 as an "unconditional offer".

However Ridout says without international support business will struggle to even meet this target.
"A reduction of emissions anywhere in this range by 2020 would require a very considerable effort. The reduction of 5 percent of 2000 levels by 2020 in the absence of global action would be particularly difficult."

It for this reason Anderson says it is critical Garnaut’s other missing link is secured before any further decisions are made.

"Against this backdrop, the results of Treasury modelling, which is scheduled to be released in late October, is more important than ever," Anderson says.

"ACCI is hopeful that this modelling will examine the full distributional impact of climate change measures on sectors such as trade exposed, smaller enterprises and the household sector.

"Until this process is completed and assessed, we will not be fully informed of the economic implications of different mid-term targets in 2020."

Federal Climate Change Minister Penny Wong says the Government will not announce what reduction target it will set until Treasury modelling is released in December.

More comment is being sort.

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